0001493152-18-011292.txt : 20180809 0001493152-18-011292.hdr.sgml : 20180809 20180809171448 ACCESSION NUMBER: 0001493152-18-011292 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 75 CONFORMED PERIOD OF REPORT: 20180630 FILED AS OF DATE: 20180809 DATE AS OF CHANGE: 20180809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Interpace Diagnostics Group, Inc. CENTRAL INDEX KEY: 0001054102 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 222919486 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24249 FILM NUMBER: 181006326 BUSINESS ADDRESS: STREET 1: MORRIS CORPORATE CENTER 1, STREET 2: BUILDING C, 300 INTERPACE PARKWAY CITY: PARSIPPANY STATE: NJ ZIP: 07054 BUSINESS PHONE: 412-224-6100 MAIL ADDRESS: STREET 1: MORRIS CORPORATE CENTER 1, STREET 2: BUILDING C, 300 INTERPACE PARKWAY CITY: PARSIPPANY STATE: NJ ZIP: 07054 FORMER COMPANY: FORMER CONFORMED NAME: PDI INC DATE OF NAME CHANGE: 20021113 FORMER COMPANY: FORMER CONFORMED NAME: PROFESSIONAL DETAILING INC DATE OF NAME CHANGE: 19980129 10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 10-Q

 

 

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2018

 

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: 000-24249

 

Interpace Diagnostics Group, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   22-2919486
(State or other jurisdiction of
Incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

Morris Corporate Center 1, Building C
300 Interpace Parkway, Parsippany, NJ 07054
(Address of principal executive offices and zip code)

 

(855) 776-6419
(Registrant’s telephone number, including area code)

 

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

 

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] 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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ] Accelerated filer [  ] Non-accelerated filer [  ] Smaller reporting company [X]
   

(Do not check if a smaller

reporting company)

 

       
Emerging Growth Company [  ]      

 

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

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

 

Class 

Shares Outstanding

August 3, 2018

 
Common stock, $0.01 par value   28,194,275 

 

 

 

 
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

FORM 10-Q FOR PERIOD ENDED JUNE 30, 2018

TABLE OF CONTENTS

 

    Page No.
  PART I - FINANCIAL INFORMATION  
     
Item 1. Unaudited Interim Condensed Consolidated Financial Statements  
     
  Condensed Consolidated Balance Sheets at June 30, 2018 (unaudited) and December 31, 2017 3
     
  Condensed Consolidated Statements of Operations for the three- and six-month periods ended June 30, 2018 and 2017 (unaudited) 4
     
  Condensed Consolidated Statement of Stockholders’ Equity for the six-month period ended June 30, 2018 (unaudited) 5
     
  Condensed Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2018 and 2017 (unaudited) 6
     
  Notes to Unaudited Interim Condensed Consolidated Financial Statements 7
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 22
     
Item 4. Controls and Procedures 34
     
  PART II - OTHER INFORMATION  
     
Item 1. Legal Proceedings 35
     
Item 1A. Risk Factors 35
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 35
     
Item 6. Exhibits 35
     
Signatures 36

 

2
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

   June 30, 2018   December 31, 2017 
   (unaudited)     
         
ASSETS          
Current assets:          
Cash and cash equivalents  $10,084   $15,199 
Accounts receivable, net   7,647    3,437 
Other current assets   1,474    1,172 
Total current assets   19,205    19,808 
Property and equipment, net   640    654 
Other intangible assets, net   31,480    33,105 
Other long-term assets   31    31 
Total assets  $51,356   $53,598 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities:          
Accounts payable  $1,173   $391 
Accrued salaries and bonus   938    1,394 
Other accrued expenses   4,304    5,004 
Current liabilities from discontinued operations   939    1,302 
Total current liabilities   7,354    8,091 
Contingent consideration   1,111    1,349 
Other long-term liabilities   4,339    4,289 
Total liabilities   12,804    13,729 
           
Commitments and contingencies (Note 6)          
           
Stockholders’ equity:          
Preferred stock, $.01 par value; 5,000,000 shares authorized, no shares issued and outstanding   -    - 
Common stock, $.01 par value; 100,000,000 shares authorized; 28,267,344 and 27,900,806 shares issued, respectively; 28,194,275 and 27,836,456 shares outstanding, respectively   282    278 
Additional paid-in capital   174,360    173,062 
Accumulated deficit   (134,410)   (131,800)
Treasury stock, at cost (73,069 and 64,350 shares, respectively)   (1,680)   (1,671)
Total stockholders’ equity   38,552    39,869 
Total liabilities and stockholders’ equity  $51,356   $53,598 

 

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

 

3
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except for per share data)

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2018   2017   2018   2017 
                 
Revenue, net  $5,501   $3,855   $10,310   $7,325 
Cost of revenue (excluding amortization of $813 and $813 for the three months and $1,626 and $1,626 for the six months, respectively)   2,247    1,879    4,827    3,651 
Gross profit   3,254    1,976    5,483    3,674 
Operating expenses:                    
Sales and marketing   2,095    1,555    4,086    2,691 
Research and development   518    413    1,019    719 
General and administrative   1,726    2,793    3,897    4,315 
Acquisition related amortization expense   813    813    1,626    1,626 
Change in fair value of contingent consideration   -    -    -    (5,776)
Total operating expenses   5,152    5,574    10,628    3,575 
                     
Operating (loss) income   (1,898)   (3,598)   (5,145)   99 
Interest expense   -    (216)   -    (469)
Loss on extinguishment of debt   -    (2,731)   -    (4,278)
Other income (expense), net   33    (8)   144    (44)
Loss from continuing operations before tax   (1,865)   (6,553)   (5,001)   (4,692)
Provision (benefit) for income taxes   8    (301)   14    (298)
Loss from continuing operations   (1,873)   (6,252)   (5,015)   (4,394)
(Loss) income from discontinued operations, net of tax   (44)   (54)   (95)   502 
Net loss  $(1,917)  $(6,306)  $(5,110)  $(3,892)
                     
Basic (loss) income per share of common stock:                    
From continuing operations  $(0.07)  $(0.65)  $(0.18)  $(0.64)
From discontinued operations   (0.00)   (0.01)   (0.00)   0.07 
Net loss per basic share of common stock  $(0.07)  $(0.65)  $(0.18)  $(0.57)
                     
Diluted (loss) income per share of common stock:                    
From continuing operations  $(0.07)  $(0.65)  $(0.18)  $(0.64)
From discontinued operations   (0.00)   (0.01)   (0.00)   0.07 
Net loss per diluted share of common stock  $(0.07)  $(0.65)  $(0.18)  $(0.57)
Weighted average number of common shares and common share equivalents outstanding:                    
Basic   27,933    9,657    27,894    6,877 
Diluted   27,933    9,657    27,894    6,877 

 

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

 

4
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited, in thousands)

 

   For The Six Months Ended 
   June 30, 2018
   Shares   Amount 
Common stock:          
Balance at January 1   27,901   $278 
Common stock issued   366    4 
Balance at June 30   28,267    282 
Treasury stock:          
Balance at January 1   64    (1,671)
Treasury stock purchased   9    (9)
Balance at June 30   73    (1,680)
Additional paid-in capital:          
Balance at January 1        173,062 
Stock-based compensation expense        1,016 
Common stock issued        282 
Balance at June 30        174,360 
Accumulated deficit:          
Balance at January 1        (131,800)
Net loss        (5,110)
Adoption of ASC 606, see Note 3        2,500 
Balance at June 30        (134,410)
Total stockholders’ equity       $38,552 

 

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

 

5
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

 

   Six Months Ended 
   June 30, 
   2018   2017 
         
Cash Flows Used in Operating Activities          
Net loss  $(5,110)  $(3,892)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   1,710    1,937 
Interest accretion   1    271 
Provision for bad debt   -    25 
Amortization of debt issuance costs   -    117 
Mark to market on derivatives   -    61 
Reversal of severance accrual   -    (2,034)
Reversal of DOJ accrual   (350)   - 
Mark to market on warrants   (66)   76 
Loss on extinguishment of debt   -    4,278 
Stock-based compensation, consulting agreements   24    - 
Stock-based compensation   1,016    206 
Change in fair value of contingent consideration   -    (5,776)
Other changes in assets and liabilities:          
Increase  in accounts receivable   (1,710)   (512)
(Increase) decrease in other current assets   (40)   53 
Decrease in other long-term assets   -    220 
Increase (decrease) in accounts payable   782    (1,358)
Decrease in accrued salaries and bonus   (456)   (1,549)
Decrease in other accrued expenses   (944)   (789)
Increase in other long-term liabilities   116    94 
Net cash used in operating activities   (5,027)   (8,572)
           
Cash Flows Used in Investing Activities          
Purchase of property and equipment   (79)   - 
Net cash used in investing activities   (79)   - 
           
Cash Flows Used in Financing Activities          
Issuance of common stock, net of expenses   -    22,263 
Cash paid for repurchase of restricted shares   (9)   (28)
Net cash (used in) provided by financing activities   (9)   22,235 
           
Net (decrease) increase  in cash and cash equivalents   (5,115)   13,663 
Cash and cash equivalents – beginning   15,199    602 
Cash and cash equivalents – ending  $10,084   $14,265 

 

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

 

6
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular information in thousands, except per share amounts)

 

1. BASIS OF PRESENTATION

 

The accompanying unaudited interim condensed consolidated financial statements and related notes (the “Interim Financial Statements”) should be read in conjunction with the consolidated financial statements of Interpace Diagnostics Group, Inc. (the “Company” or “Interpace”), and its wholly-owned subsidiaries, Interpace Diagnostics Lab Inc., Interpace Diagnostics Corporation and Interpace Diagnostics, LLC, and related notes as included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the U.S. Securities and Exchange Commission (“SEC”) on March 23, 2018. The condensed Interim Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The condensed Interim Financial Statements include all normal recurring adjustments that, in the judgment of management, are necessary for a fair presentation of such interim financial statements. Discontinued operations include the Company’s wholly owned subsidiaries: Group DCA, LLC, (“Group DCA”); InServe Support Solutions; and TVG, Inc. and its Commercial Services (“CSO”) business unit which was sold on December 22, 2015. All significant intercompany balances and transactions have been eliminated in consolidation. Operating results for the six-month period ended June 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018.

 

2. LIQUIDITY

 

As of June 30, 2018, the Company had cash and cash equivalents of $10.1 million, net accounts receivable of $7.6 million, total current assets of $19.2 million and total current liabilities of $7.4 million. For the six months ended June 30, 2018, the Company had a net loss of $5.1 million and cash used in operating activities was $5.0 million.

 

The Company does not expect to generate positive cash flows from operations for the year ending December 31, 2018. The Company believes however, that it has sufficient cash balances to meet near term obligations and further intends to meet its capital needs by revenue growth, containing costs, entering into strategic alliances as well as exploring other options, including the possibility of raising additional debt or equity capital as necessary. There is, however, no assurance the Company will be successful in meeting its capital requirements prior to becoming cash flow positive.

 

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Accounting Estimates

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experience, facts and circumstances available at the time, and various other assumptions that are believed to be reasonable under the circumstances. Significant estimates include accounting for valuation allowances related to deferred income taxes, contingent consideration, allowances for doubtful accounts, revenue recognition, unrecognized tax benefits, and asset impairments involving other intangible assets. The Company periodically reviews these matters and reflects changes in estimates in earnings as appropriate. Actual results could materially differ from those estimates.

 

7
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

 

Revenue Recognition

 

Our Services

 

We are a fully integrated commercial and bioinformatics company that develops and provides clinically useful molecular diagnostic tests and pathology services. We develop and commercialize molecular diagnostic tests and related first line assays principally focused on early detection of patients at high risk of cancer and leverage the latest technology and personalized medicine for improved patient diagnosis and management. We currently have four commercialized molecular diagnostic assays in the marketplace for which we are receiving reimbursement: PancraGEN®, which is a pancreatic cyst and pancreaticobiliary solid lesion molecular test that helps physicians better assess risk of pancreaticobiliary cancers using our proprietary PathFinderTG® platform; ThyGenX® (now known as ThyGeNEXT™), which is an oncogenic mutation panel that helps identify malignant thyroid nodules; ThyraMIR®, which assesses thyroid nodules for risk of malignancy utilizing a proprietary microRNA gene expression assay; and RespriDX™, launched in September 2017, for assessing metastatic versus primary lung cancer tumors. RespriDX™ also utilizes our PathFinderTG® platform and compares the genetic fingerprint of two or more sites of lung cancer to determine whether the neoplastic deposits are representative of a recurrence of cancer or a new primary (independent) cancer. We are also “soft launching” BarreGEN®, an esophageal cancer risk classifier for Barrett’s Esophagus that also utilizes our PathFinder TG® platform.

 

Adoption of Accounting Standards Codification Topic 606 (“ASC 606”), “Revenue from Contracts with Customers”

 

Effective January 1, 2018, the Company adopted ASC 606 which amends the guidance for the recognition of revenue from contracts with customers for the transfer of goods and services, by using the modified-retrospective method applied to any contracts that were not completed as of January 1, 2018. The results for the reporting period beginning after January 1, 2018, are presented in accordance with the new standard, although comparative information has not been restated and continues to be reported under the accounting standards and policies in effect for those periods.

 

Upon adoption, the Company performed a comprehensive analysis of existing revenue arrangements as of January 1, 2018 following the five-step model outlined in ASC 606. Based on our analysis, we recorded a cumulative adjustment to opening accumulated deficit and increase of accounts receivable of $2.5 million as of January 1, 2018. The cumulative impact was driven by a change in the timing of revenue recognition for certain payer categories and the related proprietary tests performed. The balance of accounts receivable related to the adjustment is approximately $0.9 million as of June 30, 2018.

 

8
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

 

The following tables present the effect of the adoption of ASC Topic 606 on our condensed consolidated balance sheet and revenue as of and for the six months ended June 30, 2018:

 

Consolidated Balance Sheet:

 

 

   June 30, 2018 
       (unaudited)     
   As reported   Balances without Adoption of ASC 606   Effect of Change
Higher/(Lower)
 
Accounts receivable, net  $7,647   $6,731   $916 
Accumulated deficit   (134,410)   (136,910)   (2,500)

 

Revenue:

 

   For the six months ended June 30, 2018 
       (unaudited)     
   As reported   Balances without Adoption of ASC 606   Effect of Change
Higher/(Lower)
 
Revenue, net  $10,310   $9,580   $730 

 

 

Historically, for certain third-party payers that did not have established contractual reimbursement rates or a predictable pattern of collectability, including commercial insurance carriers, Medicaid and certain direct-bill payers (primarily hospitals, but also laboratories), the Company previously recognized revenues when the fee was fixed or determinable and collectability was reasonably assured, which was upon request of third-party payer notification of payment or when cash was received. Under the new standard, the Company estimates the variable consideration within the transaction price for all third-party payers and proprietary tests and recognizes revenue as the Company satisfies its performance obligations.

 

In addition, the Company updated its estimates of the expected transaction price and related reimbursement rates for its payer categories and related proprietary tests based on the variable consideration guidance in ASC 606. This consisted of updating the reimbursement rates realized by the Company’s proprietary tests based on historical amounts received by each payer category for the corresponding tests performed.

 

Overall, other than an initial acceleration in the timing of our revenue recognition for certain payer categories, the adoption of this new standard will not have a significant impact on our reported total revenues and operating results as compared to amounts that would have been reported under the prior revenue recognition standard over our typical revenue cycle. Our accounting policies under the new standard were applied prospectively and are discussed further below.

 

Revenue Recognition after adoption of ASC 606

 

Upon adoption of ASC 606, the Company recognizes revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price using the expected value method based on historical experience.

 

9
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

 

The Company derives its revenues from the performance of its proprietary tests. The Company’s performance obligation is fulfilled upon completion, review and release of test results to the customer. The Company subsequently bills third-party payers or direct-bill payers for the proprietary tests performed. Revenue is recognized based on the estimated transaction price or net realizable value (“NRV”), which is determined based on historical collection rates by each payer category for each proprietary test offered by the Company. The Company regularly reviews the ultimate amounts received from the third-party payers and related estimated reimbursement rates and adjusts the NRV’s and related contractual allowances accordingly. If actual collections and related NRV’s vary from our estimates, we will adjust the estimates of contractual allowances, which would affect net revenue in the period such variances become known.

 

Disaggregated Revenues

 

We operate in a single operating segment and, therefore, the results of our operations are reported on a consolidated basis for purposes of segment reporting, which is consistent with internal management reporting. For the six-month periods ended June 30, 2018 and June 30, 2017, the majority of the Company’s revenues were derived from its molecular diagnostic tests.

 

Financing and Payment

 

Our payment terms vary by third-party payers and type of proprietary testing services performed. The term between invoicing and when payment is due is not significant.

 

Costs to Obtain or Fulfill a Customer Contract

 

Sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded in sales and marketing expense in the condensed consolidated statements of operations.

 

Accounts Receivable

 

The Company’s accounts receivable represent unconditional rights to consideration and are generated using its proprietary tests. The Company’s services are fulfilled upon completion of the test, review and release of the test results. In conjunction with fulfilling these services, the Company bills the third-party payer or direct-bill payer. Prior to the adoption of ASC 606 on January 1, 2018, the Company recognized accounts receivable related to billings for Medicare, Medicare Advantage, and direct-bill payers on an accrual basis, net of contractual adjustment, when collectability was reasonably assured. Under ASC 606 accounts receivable is now recognized for all payer groups, net of contractual adjustment and net of estimated uncollectable amounts. Contractual adjustments represent the difference between the list prices and the reimbursement rates set by third party payers, including Medicare, commercial payers, and amounts billed to direct-bill payers. Specific accounts may be written off after several appeals, which in some cases may take longer than twelve months.

 

10
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

 

Other Current Assets

 

Other current assets consisted of the following as of June 30, 2018 and December 31, 2017:

 

   June 30, 2018   December 31, 2017 
   (unaudited)     
         
Indemnification asset  $875   $875 
Prepaid assets   556    266 
Other   43    31 
   $1,474   $1,172 

 

Long-Lived Assets, including Finite-Lived Intangible Assets

 

Finite-lived intangible assets are stated at cost less accumulated amortization. Amortization of finite-lived acquired intangible assets is recognized on a straight-line basis, using the estimated useful lives of the assets of approximately two years to nine years in acquisition related amortization expense in the condensed consolidated statements of operations.

 

The Company reviews the recoverability of long-lived assets and finite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, an impairment loss is recognized by reducing the recorded value of the asset to its fair value measured by future discounted cash flows. This analysis requires estimates of the amount and timing of projected cash flows and, where applicable, judgments associated with, among other factors, the appropriate discount rate. Such estimates are critical in determining whether any impairment charge should be recorded and the amount of such charge if an impairment loss is deemed to be necessary.

 

Discontinued Operations

 

The Company accounts for business dispositions and its businesses held for sale in accordance with ASC 205-20, Discontinued Operations (“ASC 205-20”). ASC 205-20 requires the results of operations of business dispositions to be segregated from continuing operations and reflected as discontinued operations in current and prior periods. See Note 11, Discontinued Operations for further information.

 

11
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

 

Basic and Diluted Net Loss per Share

 

A reconciliation of the number of shares of common stock used in the calculation of basic and diluted loss per share for the three- and six-month periods ended June 30, 2018 and 2017 is as follows:

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2018   2017   2018   2017 
   (unaudited) 
                 
Basic weighted average number of common shares   27,933    9,657    27,894    6,877 
Potential dilutive effect of stock-based awards   -    -    -    - 
Diluted weighted average number of common shares   27,933    9,657    27,894    6,877 

 

The following outstanding stock-based instruments were excluded from the computation of the effect of dilutive securities on loss per share for the following periods because they would have been anti-dilutive:

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2018   2017   2018   2017 
   (unaudited) 
                 
Options   2,256    323    2,256    323 
Stock-settled stock appreciation rights (SARs)   59    85    59    85 
Restricted stock units (RSUs)   220    68    220    68 
Warrants   13,542    17,105    13,542    17,105 
    16,077    17,581    16,077    17,581 

 

12
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

 

4. OTHER INTANGIBLE ASSETS

 

The net carrying value of the identifiable intangible assets as of June 30, 2018 and December 31, 2017 are as follows:

 

       As of June 30, 2018   As of December 31, 2017 
       (unaudited)     
   Life   Carrying   Carrying 
   (Years)   Amount   Amount 
Diagnostic assets:               
Asuragen acquisition:               
Thyroid   9   $8,519   $8,519 
RedPath acquisition:               
Pancreas test   7    16,141    16,141 
Barrett’s test   9    18,351    18,351 
Total       $43,011   $43,011 
Diagnostic lab:               
CLIA Lab   2.3   $609   $609 
                
Accumulated Amortization       $(12,140)  $(10,515)
                
Net Carrying Value       $31,480   $33,105 

 

Amortization expense was approximately $0.8 million for the three-month periods ended June 30, 2018 and 2017, respectively, and approximately $1.6 million for the six-month periods ended June 30, 2018 and 2017, respectively. Amortization of our diagnostic assets begins upon launch of the product. Estimated amortization expense for the next five years is as follows, based on current assumptions of future product launches:

 

2018   2019   2020   2021   2022 
$3,252   $5,292   $5,292   $4,908   $2,987 

 

5. FAIR VALUE MEASUREMENTS

 

Cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their relative short-term nature. The Company’s financial liabilities reflected at fair value in the condensed consolidated financial statements include contingent consideration and warrant liability. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including the market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based upon observable inputs used in the valuation techniques, the Company is required to provide information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values into three broad levels as follows:

 

  Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.
     
  Level 2: Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.
     
  Level 3: Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

 

13
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

 

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The valuation methodologies used for the Company’s financial instruments measured on a recurring basis at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, are set forth in the tables below:

 

   As of June 30, 2018   Fair Value Measurements 
   Carrying   Fair   As of June 30, 2018 
   Amount   Value   Level 1   Level 2   Level 3 
   (unaudited) 
Liabilities:                         
Contingent consideration:                         
Asuragen (1)  $1,427   $1,427   $-   $-   $1,427 
Other long-term liabilities:                         
Warrant liability (2)   407    407    -    -    407 
   $1,834   $1,834   $-   $-   $1,834 

 

   As of December 31, 2017   Fair Value Measurements 
   Carrying   Fair   As of December 31, 2017 
   Amount   Value   Level 1   Level 2   Level 3 
Liabilities:                         
Contingent consideration:                         
Asuragen (1)  $1,581   $1,581   $-   $-   $1,581 
Other long-term liabilities:                         
Warrant liability (2)   473    473    -    -    473 
   $2,054   $2,054   $-   $-   $2,054 

 

(1)(2) See Note 7, Accrued Expenses and Long-Term Liabilities

 

In connection with the acquisition of certain assets from Asuragen, the Company recorded contingent consideration related to contingent payments and other revenue-based payments. The Company determined the fair value of the contingent consideration based on a probability-weighted income approach derived from revenue estimates. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement.

 

On June 21, 2017, the Company closed on a public offering issuing both Pre-Funded Warrants and Underwriters Warrants to purchase 2,600,000 shares and 575,000 shares of the Company’s common stock, respectively. Both the Pre-Funded and Underwriters Warrants include a cash settlement feature in the event of certain circumstances. Accordingly, both the Pre-Funded and Underwriters Warrants are classified as liabilities and were fair valued using the Black Scholes Option-Pricing Model, the inputs for which included exercise price of the respective warrants, market price of the underlying common shares, expected term, volatility based on the Company’s historical market price, and the risk-free rate corresponding to the expected term of the underlying agreement. Changes to the fair value of the warrant liabilities are recorded in Other income (expense), net. The Pre-Funded Warrants were fully exercised in 2017 and therefore the Company has no remaining liability associated with those warrants.

 

14
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

 

A roll forward of the carrying value of the Contingent consideration liability and the Underwriters’ Warrant to June 30, 2018 is as follows:

 

               Cancellation   Mark to     
   December 31,           of Obligation/   Market   June 30, 
   2017   Payments   Accretion   Conversions   Adjustment   2018 
   (unaudited) 
                         
Asuragen  $1,581   $(155)  $1   $-   $-   $1,427 
                               
Underwriters Warrant   473    -         -    (66)   407 
   $2,054   $(155)  $1   $-   $(66)  $1,834 

 

Certain of the Company’s non-financial assets, such as other intangible assets, are re-measured at fair value on a nonrecurring basis, if and when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized.

 

6. COMMITMENTS AND CONTINGENCIES

 

Litigation

 

Due to the nature of the businesses in which the Company is engaged it is subject to certain risks. Such risks include, among others, risk of liability for personal injury or death to persons using products the Company promotes or commercializes. There can be no assurance that substantial claims or liabilities will not arise in the future due to the nature of the Company’s business activities and recent increases in litigation related to healthcare products.

 

The Company could also be held liable for errors and omissions of its employees in connection with the services it performs that are outside the scope of any indemnity or insurance policy. The Company could be materially adversely affected if it were required to pay damages or incur defense costs in connection with a claim that is outside the scope of an indemnification agreement; if the indemnity, although applicable, is not performed in accordance with its terms; or if the Company’s liability exceeds the amount of applicable insurance or indemnity.

 

As of June 30, 2018, the Company’s accrual for litigation and threatened litigation was not material to the condensed consolidated financial statements.

 

15
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

 

RedPath – DOJ Settlement

 

In connection with the October 31, 2014 acquisition of RedPath Integrated Pathology, Inc., (“RedPath”), the Company assumed a liability for the settlement agreement entered into by the former owners of RedPath with the Department of Justice (“DOJ”). Under the terms of the settlement agreement, the Company was obligated to make payments to the DOJ for the calendar years ended December 31, 2014 through 2017, up to a maximum of $3.0 million. Payments were due on March 31st following the calendar year in which the revenue milestones were achieved. The Company made payments totaling $0.5 million during the year ended December 31, 2017 related to fiscal 2016 and had accrued $0.5 million for its potential liability for fiscal 2017, the final year of the settlement agreement. During the second quarter of 2018, the Company entered into an agreement with the DOJ to settle in full the outstanding fiscal 2017 liability at approximately $0.15 million and paid this amount as the final settlement payment in July 2018.

 

Prolias Technologies, Inc. v. PDI, Inc.

 

On April 8, 2015, Prolias Technologies, Inc. (“Prolias”) filed a complaint (the “Complaint”) against the Company with the Superior Court of New Jersey (Morris County) (the “Court”) in a matter entitled Prolias Technologies, Inc. v. PDI, Inc. In the Complaint, Prolias alleged that it and the Company entered into an August 19, 2013 collaboration agreement and an amendment thereto (collectively, the “Agreement”) whereby Prolias and the Company agreed to work in good faith to commercialize a diagnostic test known as “Thymira.” On March 9, 2017, the Court entered a final judgment in the Company’s favor against Prolias for the sum of $636,053 plus ten percent interest continuing to accrue on the principal balance of $500,000 unless and until paid. Final judgment was also entered in the Company’s favor and against Prolias, declaring Prolias is deemed to have executed and delivered to the Company a promissory note in the amount of $1,000,000 and Prolias is obligated to repay the Company the principal amount and all interest in accordance with the terms of the promissory note and the Agreement. On April 3, 2017, the final judgment against Prolias was recorded as a statewide lien. The Company has not recovered on the judgment against Prolias and no assurance can be given that the Company will ever be able to recover on the judgment in the future.

 

Pittsburgh Lease

 

On March 15, 2018, the Company amended the lease for its Pittsburgh laboratory to extend it through June 30, 2023. The lease is for 20,000 square feet of laboratory and office space, with monthly base rent of $33,333 beginning July 1, 2018, escalating by twenty-five percent (25%) on July 1, 2019 to $41,667 per month. The Company may, at its option, extend the term of the Lease for two consecutive terms of five years each, with the monthly base rent escalating by ten percent (10%) for each of the additional five year terms.

 

16
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

 

7. ACCRUED EXPENSES AND LONG-TERM LIABILITIES

 

Other accrued expenses consisted of the following as of June 30, 2018 and December 31, 2017:

 

   June 30, 2018   December 31, 2017 
    (unaudited)      
           
Accrued royalties  $573   $296 
Indemnification liability   875    875 
Contingent consideration   316    232 
DOJ settlement   150    500 
Accrued professional fees   690    700 
Taxes payable   471    515 
Unclaimed property   565    565 
All others   664    1,321 
   $4,304   $5,004 

 

Long-term liabilities consisted of the following as of June 30, 2018 and December 31, 2017:

 

   June 30, 2018   December 31, 2017 
   (unaudited)     
         
Warrant liability  $407   $473 
Uncertain tax positions   3,838    3,734 
Other   94    82 
   $4,339   $4,289 

 

8. STOCK-BASED COMPENSATION

 

Stock Incentive Plan

 

The Company’s stock-incentive program is a long-term retention program that is intended to attract, retain and provide incentives for talented employees, officers and directors, and to align stockholder and employee interests. Currently, the Company is able to grant options, SARs and restricted shares from the Interpace Diagnostics Group, Inc. Amended and Restated 2004 Stock Award and Incentive Plan, (the “Amended 2004 Plan”). Unless earlier terminated by action of its Board of Directors, the Amended 2004 Plan will remain in effect until such time as no stock remains available for delivery and the Company has no further rights or obligations under the Amended 2004 Plan with respect to outstanding awards thereunder.

 

Historically, stock options have been granted with an exercise price equal to the market value of the common stock on the date of grant, expire 10 years from the date they are granted, and generally vested over a one to three-year period for employees and members of the Board of Directors. Upon exercise, new shares will be issued by the Company. The Company granted stock options in 2017 which vest monthly over a one-year period. SARs are generally granted with a grant price equal to the market value of the common stock on the date of grant, vest one-third each year on the anniversary of the date of grant and expire five years from the date of grant. The restricted shares and restricted stock units granted to employees generally have a three-year graded vesting period and are subject to accelerated vesting and forfeiture under certain circumstances. Restricted shares and restricted stock units granted to board members generally have a three-year graded vesting period and are subject to accelerated vesting and forfeiture under certain circumstances.

 

17
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

 

During March 2018, the Company’s Chief Executive Officer, Chief Financial Officer, senior executives and members of the Board were granted incentive stock options to purchase an aggregate of 745,600 shares of common stock with an exercise price of $1.01 per share and 186,400 RSUs, (subject generally to the executive’s or board member’s, as applicable, continued service with the Company), which vest one-third each year over a period of three years.

 

The following table provides the weighted average assumptions used in determining the fair value of the stock option awards granted during the six-month periods ended June 30, 2018 and 2017.

 

   Six Months Ended 
   June 30, 2018   June 30, 2017 
   (unaudited) 
         
Risk-free interest rate   2.65%   1.96%
Expected life   6.00    4.91 
Expected volatility   126.93%   138.71%
Dividend yield   -    - 

 

The Company recognized approximately $0.4 million and $0.1 million of stock-based compensation expense during the three-month periods ended June 30, 2018 and 2017, respectively, and approximately $1.0 million and $0.2 million for the six month periods ended June 30, 2018 and 2017, respectively.

 

9. INCOME TAXES

 

Generally, accounting standards require companies to provide for income taxes each quarter based on their estimate of the effective tax rate for the full year. The authoritative guidance for accounting for income taxes allows use of the discrete method when it provides a better estimate of income tax expense. Due to the Company’s valuation allowance position, it is the Company’s position that the discrete method provides a more accurate estimate of income tax expense and therefore income tax expense for the current quarter has been presented using the discrete method. As the year progresses, the Company refines its estimate based on the facts and circumstances by each tax jurisdiction. The following table summarizes income tax expense on (loss) income from continuing operations and the effective tax rate for the three- and six-month periods ended June 30, 2018 and 2017:

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2018   2017   2018   2017 
   (unaudited)   (unaudited) 
                 
Provision (benefit) from income tax  $8   $(301)  $14   $(298)
Effective income tax rate   (0.4)%   4.6%   (0.3)%   6.4%

 

Income tax expense for the three- and six-month periods ended June 30, 2018 was primarily due to minimum state and local taxes.

 

18
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

 

10. SEGMENT INFORMATION

 

Since December 22, 2015, the Company reports its operations as one segment, molecular diagnostics and bioinformatics. The Company’s reporting segment structure is reflective of the way both the Company’s management and chief operating decision maker view the business, make operating decisions and assess performance. This structure allows investors to better understand Company performance, better assess prospects for future cash flows, and make more informed decisions about the Company.

 

The Company’s molecular diagnostics and bioinformatics business focuses on developing and commercializing molecular diagnostic tests, leveraging the latest technology and personalized medicine for better patient diagnosis and management. Through the Company’s business, the Company aims to provide physicians and patients with diagnostic options for detecting genetic and other molecular alterations that are associated with gastrointestinal, endocrine and lung cancers, which are principally focused on early detection of patients at high risk of cancer. Customers in the Company’s segment consist primarily of physicians, hospitals and clinics. The service offerings throughout the segment have similar long-term average gross margins, contract terms, types of customers and regulatory environments. They are promoted through one centrally managed marketing group and the chief operating decision maker views their results on a combined basis.

 

11. DISCONTINUED OPERATIONS

 

The components of liabilities classified as discontinued operations relate to Commercial Services and consist of the following as of June 30, 2018 and December 31, 2017:

 

   June 30, 2018   December 31, 2017 
   (unaudited)     
         
Accounts payable  $192   $192 
Other   747    1,110 
Current liabilities from discontinued operations   939    1,302 
Total liabilities  $939   $1,302 

 

12. LONG-TERM DEBT

 

As more fully described in our Form 10-K filed on March 23, 2018, during the first six months of fiscal 2017 the Company entered into an Exchange Agreement related to its debt with an investor. The Company exchanged (the “RedPath Debt Exchange”) such then-existing debt for senior convertible notes (“Senior Convertible Notes”) of the Company on March 22, 2017. Subsequently between March 23, 2017 and April 18, 2017, the Senior Convertible Notes were converted into 3,795,429 shares of the Company’s common stock. The Company recorded a loss of $4.3 million in 2017 as a result of the exchange.

 

The Company has no long-term debt.

 

19
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

 

13.SUPPLEMENTAL CASH FLOW INFORMATION

 

The following table presents cash flows used in the Company’s discontinued operations for the six months ended June 30, 2018 and 2017:

 

   Six Months Ended 
   June 30, 
   2018   2017 
   (unaudited) 
Net cash used in operating activities of discontinued operations  $(354)  $(883)

 

Supplemental Cash Flow Information

(in thousands)

 

   Six Months Ended 
   June 30, 
   2018   2017 
   (unaudited) 
Operating          
Adoption of ASC 606  $2,500   $- 
Prepaid stock grants issued to vendors  $286   $- 
           
Investing          
Acquisition of property and equipment in other accrued expenses  $46   $- 
           
Financing          
Settlement of the RedPath Note  $-   $(8,098)
Issuance of the Exchange Notes  $-   $11,375 
Non-cash equity conversion costs  $-   $(173)
Debt issuance costs  $-   $(511)
Warrants issued through Termination Agreement*  $-   $193 
Common shares issued in debt exchange  $-   $8,869 

 

*See Note 14, Equity

 

14. EQUITY

 

As more fully described in our Form 10-K filed on March 23, 2018, during the first quarter of fiscal 2017 the Company issued 2,793,000 common shares and 855,000 warrants for gross proceeds amounting to $12.2 million. In addition, as described in Note 12, Long-Term Debt, the Company issued 3,795,429 common shares in connection with the RedPath Debt Exchange and conversion of Senior Convertible Notes. As part of the Debt Exchange, the Company entered into a Termination Agreement with RedPath Equityholder Representative, LLC, terminating milestone and royalty payments and issued 5 year warrants to acquire an aggregate of 100,000 shares of the Company’s common stock at a fixed price of $4.69 per share.

 

During the second quarter of 2017, the Company completed a public offering of (i) 9,900,000 shares of the Company’s common stock (the “Firm Shares”), (ii) warrants to purchase 12,500,000 shares of Common Stock at an exercise price equal to $1.25 per share (the “Base Warrants”) and (iii) warrants to purchase 2,600,000 shares of Common Stock at an exercise price equal to $0.01 per share (the “Pre-Funded Warrants”). Each Firm Share and accompanying Base Warrant was sold for a combined effective price of $1.10, and each Pre-Funded Warrant and accompanying Base Warrant was sold for a combined effective price of $1.09. The issuance of the Firm Shares and the Pre-Funded Warrants resulted in combined gross proceeds of the offering totaling $13.7 million, with approximately $12.3 million of net funds available to the Company after deducting underwriting discounts and other stock issuance expenses.

 

20
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

 

15. WARRANTS

 

There was no warrant activity for the six months ended June 30, 2018. Warrants outstanding for the period ended June 30, 2018 are as follows:

 

Description  Classification  Exercise Price   Expiration Date  Warrants Issued   Warrants Exercised   Warrants Cancelled/ Expired  

Balance

December 31, 2017

  

Balance

June 30,

2018

 
                               
Private Placement Warrants, issued January 25, 2017  Equity  $4.69   June 2022   855,000    -    -    855,000    855,000 
RedPath Warrants, issued March 22, 2017  Equity  $4.69   September 2022   100,000    -    -    100,000    100,000 
Pre-Funded Warrants, issued June 21, 2017  Liability  $0.01   None   2,600,000    (2,600,000)   -    -    - 
Underwriters Warrants, issued June 21, 2017  Liability  $1.32   December 2022   575,000    -    (40,000)   535,000    535,000 
Base & Overallotment Warrants, issued June 21, 2017  Equity  $1.25   June 2022   14,375,000    (5,672,852)   -    8,702,148    8,702,148 
Vendor Warrants, issued August 6, 2017  Equity  $1.25   August 2020   150,000    -    -    150,000    150,000 
Warrants issued October 12, 2017  Equity  $1.80   April 2022   3,200,000    -    -    3,200,000    3,200,000 
                                     
               21,855,000    (8,272,852)   (40,000)   13,542,148    13,542,148 

 

16. RECENT ACCOUNTING PRONOUNCEMENTS

 

Recently adopted standards

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers,” previously defined in Note 3 as “ASC 606”. The standard, including subsequently issued amendments, replaces most existing revenue recognition guidance in U.S. GAAP. The key focus of the new standard is that an entity should recognize revenue to depict the transfer of promised 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. To achieve this key focus, there is a five-step approach outlined in the standard. We adopted this new standard as of January 1, 2018, by using the modified-retrospective method. See Note 3, Summary of Significant Accounting Policies, for further details.

 

New standards not yet adopted

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which when effective will require organizations that lease assets (e.g., through “leases”) to recognize assets and liabilities for the rights and obligations created by the leases on the balance sheet. A lessee will be required to recognize assets and liabilities for leases with terms that exceed twelve months. The standard will also require disclosures to help investors and financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. The disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The guidance is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial position and results of operations.

 

17. SUBSEQUENT EVENTS

 

Nasdaq Correspondence

 

On May 4, 2018, the Company was notified by NASDAQ that we were no longer in compliance with the minimum bid price requirements of NASDAQ for continued listing and that we had until October 31, 2018 to regain compliance with this requirement or face delisting. On July 30, 2018 NASDAQ notified the Company that effective July 27, 2018 the Company was in compliance with the minimum bid price requirements of NASDAQ and the matter was determined to be closed.

 

Line of credit

 

Effective July 2018, the Company signed a letter of intent with Silicon Valley Bank to provide up to a 3-year $4,000,000 line of credit based on 80% of net available receivables, including a term portion of $850,000 to support capital expansions.

 

21
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

FORWARD-LOOKING STATEMENTS

 

This quarterly report on Form 10-Q (“Form 10-Q”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements that are not historical facts, including statements about our plans, objectives, beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “believes,” “expects,” “anticipates,” “plans,” “estimates,” “intends,” “projects,” “should,” “could,” “may,” “will” or similar words and expressions. These forward-looking statements are contained throughout this Form 10-Q.

 

Forward-looking statements are only predictions and are not guarantees of future performance. These statements are based on current expectations and assumptions involving judgments about, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. These predictions are also affected by known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from those expressed or implied by any forward-looking statement. Many of these factors are beyond our ability to control or predict. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors. Such factors include, but are not limited to, the following:

 

  our ability to profitably grow our business, including our ability to finance our business on acceptable terms and successfully compete in the market;
     
  our ability to obtain broad adoption of and ability to grow or continue to secure sufficient levels of reimbursement for our molecular diagnostic tests in a changing reimbursement environment;
     
  whether we are able to successfully utilize our operating experience to sell our molecular diagnostic tests;
     
  our limited operating history as a molecular diagnostics company;
     
  our dependence on a concentrated selection of payers for our molecular diagnostic tests;
     
  the demand for our molecular diagnostic tests from physicians and patients;
     
  our reliance on our internal sales forces for business expansion;
     
  our dependence on third parties for the supply of some of the materials used in our molecular diagnostic tests;
     
  our ability to scale our operations, testing capacity and processing technology;
     
  our ability to compete successfully with companies with greater financial resources;
     
  our ability to obtain sufficient data and samples to cost effectively and timely perform sufficient clinical trials in order to support our current and future products;
     
  product liability claims against us;
     
  patent infringement claims against us;
     
  our involvement in current and future litigation against us or our ability to collect on judgements found in our favor;

 

22
 

 

INTERPACE DIAGNOSTICS GROUP, INC.

 

  the effect current and future laws, licensing requirements and regulation have on our business including the changing U.S. Food and Drug Administration, or the FDA, environment as it relates to molecular diagnosis;
     
   the effect of potential adverse findings resulting from regulatory audits of our billing practices and the impact such results could have on our business;
     
  our exposure to environmental liabilities as a result of our business;
     
  the susceptibility of our information systems to security breaches, loss of data and other disruptions;
     
  our ability to enter into effective electronic data interchange arrangements with our customers and third-party payers;
     
  our billing practices and our ability to collect on claims for the sale of our molecular diagnostic tests;
     
  our dependence on a third-party medical billing provider to operate effectively without delays, data loss, or other disruptions;
     
  our ability to attract and retain qualified sales representatives and other key employees and management personnel;
     
  competition in the segment of the molecular diagnostics industry in which we operate or expect to operate;
     
  our ability to obtain additional funding when necessary, in order to implement our business models and strategies;
     
  the results of any future impairment testing for other intangible assets;
     
  our ability to successfully identify, complete and integrate any future acquisitions and the effects of any such items on our revenues, profitability and ongoing business;
     
  our compliance with our license agreements and our ability to protect and defend our intellectual property rights;
     
  our ability to maintain our listing with The Nasdaq Capital Market (“NASDAQ”);
     
  the effect of adverse weather conditions, such as hurricanes and floods, on our business;
     
  failure of third-party service providers to perform their obligations to us;
     
  the volatility of our stock price and fluctuations in our quarterly and annual revenues and earnings;
     
  our ability to obtain and maintain sufficient laboratory space to meet our processing needs as well as our ability to pass regulatory inspections and continue to be certified CLIA laboratories and be CAP certified;
     
  our ability to commercially leverage our bioinformatics data with pharmaceutical and other potential partners in new revenue lines;

 

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  the ability to obtain or maintain supportive “guidelines” from trade and/or therapeutic related organizations focused on the clinical efficacy and utility of molecular diagnostics in our areas of focus; and
     
  determination that our Advanced Diagnostic Laboratory Tests (ADLTs) have become affected by the pricing provisions of the Processing Access to Medicare Act of 2014 (“PAMA”) which could result in an across the board reduction in our reimbursement rates; and
     
  Our ability to continue to develop and support our partially customized Laboratory Information System(LIMS), which is our automated basis of managing operations, storing data and customer information.

 

Please see Part I – Item 1A – “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017, filed March 23, 2018, as well as other documents we file with the U.S. Securities and Exchange Commission (“SEC”) from time-to-time, for other important factors that could cause our actual results to differ materially from our current expectations as expressed in the forward-looking statements discussed in this Form 10-Q. Because of these and other risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. In addition, these statements speak only as of the date of the report in which they are set forth and, except as may be required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason.

 

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INTERPACE DIAGNOSTICS GROUP, INC.

 

Company Overview

 

We are a fully integrated commercial and bioinformatics company that develops and provides clinically useful molecular diagnostic tests and pathology services. We develop and commercialize molecular diagnostic tests and related first line assays principally focused on early detection of patients at high risk of cancer and leverage the latest technology and personalized medicine for improved patient diagnosis and management. Our tests and services provide mutational analysis of genetic material contained in suspect cysts, nodules and lesions that helps physicians risk-stratify thyroid, pancreatic, and other cancers to better inform treatment decisions. The molecular diagnostic tests we offer enable healthcare providers to avoid unnecessary surgeries and better assess the risk of cancer progression in their patients. We currently have four commercialized molecular diagnostic assays in the marketplace for which we are receiving reimbursement: PancraGEN®, which is a pancreatic cyst and pancreaticobiliary solid lesion molecular test that helps physicians better assess risk of pancreaticobiliary cancers using our proprietary PathFinderTG® platform; ThyGenX® (now ThyGeNEXT™) which is an oncogenic mutation panel that helps identify malignant thyroid nodules; and ThyraMIR®, which assess thyroid nodules for risk of malignancy utilizing a proprietary microRNA gene expression assay. We also launched in September 2017 RespriDX ™, which is a molecular test that helps physicians differentiate metastatic or recurrent lung cancer from the presence of a newly formed primary lung cancer. RespriDX™ also utilizes our PathFinderTG® platform to compare the genomic fingerprint of two or more sites of lung cancer. We are also in the process of “soft launching” while we gather additional market data, BarreGen®, an esophageal cancer risk classifier for Barrett’s Esophagus that also utilizes our PathFinderTG® platform.

 

Our mission is to provide personalized medicine through molecular diagnostics and innovation to advance patient care based on rigorous science. Our laboratories are licensed pursuant to federal law under the Clinical Laboratory Improvement Amendments (“CLIA”) and are accredited by the College of American Pathologists (“CAP”) and New York State (“NYS”). We are leveraging our licensed and accredited laboratories to develop and commercialize our assays and products. We aim to provide physicians and patients with diagnostic options for detecting genomic and other molecular alterations that are associated with gastrointestinal, endocrine, and lung cancers. Our customers consist primarily of physicians, hospitals and clinics.

 

The global molecular diagnostics market is estimated to be $6.5 billion and is a segment within the approximately $60 billion in vitro diagnostics market according to statistics from Kalorama Information, publisher of the Worldwide Market for In Vitro Diagnostic Tests. We believe that the molecular diagnostics market offers significant growth and strong patient value given the substantial opportunity it affords to lower healthcare costs by helping to reduce unnecessary surgeries and ensuring the appropriate frequency of monitoring. We are keenly focused on growing our test volumes, securing additional coverage and reimbursement, maintaining and growing our current reimbursement, supporting revenue growth for our four commercialized innovative tests, introducing related first line product and service extensions, as well as expanding our business by developing and promoting synergistic products in our markets. We believe that BarreGen® is a potentially important pipeline product, also built on the PathFinderTG® platform, which we believe is synergistic to our capabilities and potentially is a significant product opportunity in the gastrointestinal market, which is one of the sectors in which we operate.

 

Additional Reimbursement Coverage and Network Availability During 2018 (to-date)

 

Reimbursement progress is key for any molecular diagnostic company. We have been successful to date in 2018 expanding the reimbursement of our products. Specifically, the most significant progress we have made regarding payers to date in 2018 is as follows:

 

  In February 2018, we announced that Horizon Blue Cross Blue Shield of New Jersey, the oldest and largest health plan in New Jersey, covering 3.8 million patients living in the Northeastern United States, has agreed to cover ThyGenX® (now ThyGeNEXT™) and ThyraMIR® for its members effective January 9, 2018.
     
 

In March 2018, we announced coverage of ThyGenX® (now ThyGeNEXT™) and ThyraMIR® by four new Blue Cross Blue Shield Plans: Blue Cross Blue Shield of Arizona, Blue Cross Blue Shield of South Carolina, Wellmark Blue Cross Blue Shield of Iowa, and Wellmark Blue Cross Blue Shield of South Dakota. These four plans combined represent over 5 million members.

 

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  In March 2018 we announced that we had entered into a laboratory services agreement with Acupath Laboratories, Inc. based in Plainview, New York (Long Island) whereby Acupath’s Commercial team will be selling ThyGenX® (now ThyGeNEXT™) and ThyraMIR® as part of its menu for endocrinologists, endocrine surgeons, and other physicians focused on the diagnosis and treatment of thyroid cancer.
     
  In April 2018, we announced that we had entered into an Agreement with BJC Healthcare of St. Louis, Missouri, one of the largest non-profit, integrated healthcare systems in the United States. The Agreement enables all physicians across the BJC system access to both ThyGenX® (now ThyGeNEXT™) and ThyraMIR® for patients with indeterminate thyroid nodules.
     
  In May 2018, we announced that we had entered into an agreement with Vanderbilt University Medical Center (VUMC) based in Nashville, TN, one of the largest academic medical centers in the country. The agreement enables all physicians across the Vanderbilt system access to both ThyGenX® (now ThyGeNEXT™) and ThyraMIR® for patients with indeterminate thyroid nodules.
     
  In May 2018, we announced that 14 Blue Cross Blue Shield plans across the country have published favorable coverage policies since the beginning of 2018 for ThyGenX® (now ThyGeNEXT™) and ThyraMIR®, the Company’s molecular tests for indeterminate thyroid nodules. The list of plans includes many of the largest Blue Cross Blue Shield plans in the country, including Blue Shield of California and Horizon Blue Cross Blue Shield of New Jersey, previously announced by us. As a result of these 14 new policies, over 75 million members participating in these plans now have coverage for ThyGenX® (now ThyGeNEXT™) and ThyraMIR® testing.
     
  In June 2018, we announced coverage of ThyGenX® (now ThyGeNEXT™) and ThyraMIR® by Blue Cross Blue Shield of Florida, the largest health plan in Florida with over three million members. As of July 2018 there are twenty-seven regional Blue Cross Blue Shield regional payers, who have agreed to provide coverage for ThyGenX® (now ThyGeNEXT™) and ThyraMIR®.
     
  In July 2018, we announced that we expanded the application of PancraGEN® beyond pancreatic cysts to include both biliary strictures and solid pancreatic lesions while gaining further Guideline support in the marketplace. PancraGEN® is the first and only commercially available integrated molecular pathology test for pancreaticobiliary cancers.
     
  In July 2018, we also announced that CIGNA, one of the nation’s largest health plan providers, has agreed to cover ThyraMIR®, the first microRNA gene expression classifier for thyroid nodules, as medically necessary. This is in addition to its coverage of ThyGenX®, (now ThyGeNEXT™) as previously announced in 2017.

 

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DESCRIPTION OF REPORTING SEGMENTS

 

Since December 22, 2015, the Company reports its operations as one segment, molecular diagnostics and bioinformatics. The Company’s reporting segment structure is reflective of the way both the Company’s management and chief operating decision maker view the business, make operating decisions and assess performance. We believe this structure allows investors to better understand Company performance, better assess prospects for future cash flows, and make more informed decisions about the Company.

 

Revenue

 

The Company’s revenue is generated from the performance of its proprietary tests. The Company’s performance obligation is fulfilled upon completion, review and release of test results and subsequent billing to the third-party payer, hospital or service provider.

 

Revenue Recognition Prior to the Adoption of ASC 606

 

Historically, for the time periods through December 2017, the Company recognized revenue from services rendered when the following four revenue recognition criteria were met: persuasive evidence of an arrangement exists; services have been rendered; the selling price is fixed or determinable; and collectability is reasonably assured. The Company recognized revenue related to billings for Medicare, Medicare Advantage, and direct-bill payers on an accrual basis, net of contractual adjustment, when there was a predictable pattern of collectability. Contractual adjustments represent the difference between the list prices and the reimbursement rate set by Medicare and Medicare Advantage, or the amounts billed to direct-bill payers, which approximates the Medicare rate. For certain third-party payers that did not have established contractual reimbursement rates or a predictable pattern of collectability, including commercial insurance carriers and Medicaid, the Company believed that the fee was fixed or determinable and collectability was reasonably assured only upon request of third-party payer notification of payment or when cash is received, and recognized revenue at that time.

 

Until a contract had been negotiated with a commercial insurance carrier or governmental program, the services may or may not be covered by these entities’ existing reimbursement policies. In the absence of an agreement with the patient or other clearly enforceable legal right to demand payment, the related revenue was only recognized upon the earlier of payment notification or cash receipt. Accordingly, we recognized revenue from commercial insurance carriers, government programs, and certain direct-bill healthcare providers without contracts when payment was received.

 

Revenue Recognition after the Adoption of ASC 606

 

Beginning January 1, 2018 under ASC 606, the Company began to recognize revenue for billings less contractual allowances and estimated uncollectable amounts for all payer groups on the accrual basis based upon a thorough analysis of historical receipts. The net amount derived and used for revenue recognition is referred to as the “net realizable value” or (“NRV”) for the particular test and payer group from which reimbursement is received. This derived NRV will be evaluated quarterly or as needed and then applied to future periods until recalculated.

 

The Company completed its analysis of the ASC 606 impact and incorporated further analysis of first quarter 2018 collections from its commercial payer base in finalizing its ASC 606 adjustments. The impact of recording the cumulative catch-up adjustment under the modified retrospective method was $2.5 million, recorded as an increase to opening retained earnings on January 1, 2018. Prior periods have not been retrospectively adjusted. The Company also finalized its analysis of modified internal controls over financial reporting and the disclosures required starting with Form 10-Q for the first quarter of 2018.

 

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Cost of services

 

Cost of services consists primarily of the costs associated with operating our laboratories and other costs directly related to our tests. Personnel costs, which constitute the largest portion of cost of services, include all labor related costs, such as salaries, bonuses, fringe benefits and payroll taxes for laboratory personnel. Other direct costs include, but are not limited to, laboratory supplies, certain consulting expenses, and facility expenses.

 

CONDENSED CONSOLIDATED RESULTS OF OPERATIONS

 

The following table sets forth, for the periods indicated, certain statements of operations data. The trends illustrated in this table may not be indicative of future results.

 

Condensed Consolidated Results of Continuing Operations for the Quarter Ended June 30, 2018 Compared to the Quarter Ended June 30, 2017 (in thousands)

 

   Three Months Ended 
   June 30, 
   2018   2018   2017   2017 
                 
Revenue, net  $5,501    100.0%  $3,855    100.0%
Cost of revenue   2,247    40.8%   1,879    48.7%
Gross profit   3,254    59.2%   1,976    51.3%
Operating expenses:                    
Sales and marketing   2,095    38.1%   1,555    40.3%
Research and development   518    9.4%   413    10.7%
General and administrative   1,726    31.4%   2,793    72.5%
Acquisition related amortization expense   813    14.8%   813    21.1%
Total operating expenses   5,152    93.7%   5,574    144.6%
                     
Operating loss   (1,898)   -34.5%   (3,598)   -93.3%
Interest expense   -    0.0%   (216)   -5.6%
Loss on extinguishment of debt   -    0.0%   (2,731)   -70.8%
Other income (expense), net   33    0.6%   (8)   -0.2%
Loss from continuing operations before tax   (1,865)   -33.9%   (6,553)   -170.0%
Provision (benefit) for income tax   8    0.1%   (301)   -7.8%
Loss from continuing operations   (1,873)   -34.0%   (6,252)   -162.2%
Loss from discontinued operations, net of tax   (44)   -0.8%   (54)   -1.4%
Net loss  $(1,917)   -34.8%  $(6,306)   -163.6%

 

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Revenue, net

 

Consolidated revenue for the three months ended June 30, 2018 increased by $1.6 million, or 42.7%, to $5.5 million, compared to $3.9 million for the three months ended June 30, 2017. This increase was principally attributable to increased test volume and commercial coverage for our thyroid tests and the change in revenue recognition under ASC 606 from cash basis to accrual of approximately $0.3 million for certain payer groups, as disclosed in the footnotes to the financial statements.

 

Cost of revenue

 

Consolidated cost of revenue for the three months ended June 30, 2018 increased by $0.4 million, or 19.6%. As a percentage of revenue cost of revenue decreased to 40.8% as compared to 48.7% in the comparable prior year period. The decrease as a percentage of revenue can be attributed to efficiencies in the manufacturing process relative to higher test volumes as well as the timing of purchases.

 

Gross profit

 

Consolidated gross profit for the three months ended June 30, 2018 increased $1.3 million, or 64.7%, to $3.3 million, compared to $2.0 million for the three months ended June 30, 2017. This increase was primarily related to the increase in revenue and improved laboratory cost efficiencies related to higher test volumes, as discussed above.

 

Sales and marketing expense

 

Sales and marketing expense was $2.1 million for the three months ended June 30, 2018 and as a percentage of revenue was 38.1%. For the three months ended June 30, 2017, sales and marketing expense was $1.6 million and 40.3% as a percentage of revenue. The increase in sales and marketing expense principally reflects an increase in salesforce costs as well as increased marketing spending.

 

Research and development

 

Research and development expense reflects clinical and research costs for supplies, laboratory tests and evaluations, scientific and administrative staff involved in clinical research, statistical research and product development related to new tests, products and programs. These costs were approximately $0.5 million for the three months ended June 30, 2018 and approximately $0.4 million for the three months ended June 30, 2017. As a percentage of revenue they were 9.4% for the three months ended June 30, 2018 and 10.7% for the three months ended June 30, 2017.

 

General and administrative

 

General and administrative expense for the three months ended June 30, 2018 was $1.7 million as compared to $2.8 million for the three months ended June 30, 2017. The decrease was primarily attributable to a net decrease in the Department of Justice (“DOJ”) accrual expense of approximately $0.5 million, $0.3 million in warrant issuance costs and $0.2 million in rent and moving expenses that occurred in the second quarter of 2017, with no similar cost in fiscal 2018.

 

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Acquisition related amortization expense

 

During both the three months ended June 30, 2018 and June 30, 2017, we recorded amortization expense of approximately $0.8 million in connection with the RedPath and Asuragen acquired intangible assets.

 

Operating loss

 

We experienced operating losses of $1.9 million for the three months ended June 30, 2018 and $3.6 million for the three months ended June 30, 2017. The decrease in the operating loss for the three months ended June 30, 2018 was primarily attributable to the increase in revenue and gross profit and the decrease in G&A expenses discussed above.

 

Provision (benefit) for income taxes

 

We had income tax expense of approximately $8,000 for the three months ended June 30, 2018 and an income tax benefit of approximately $0.3 million for the three months ended June 30, 2017. Income tax expense for 2018 was primarily due to required minimum state and local taxes. The income tax benefit for 2017 was primarily due to allocation of tax expense between continuing and discontinued operations.

 

Loss from discontinued operations, net of tax

 

We had a loss from discontinued operations of approximately $44,000 for the three months ended June 30, 2018 and a loss from discontinued operations of $0.1 million for the three months ended June 30, 2017. The loss from discontinued operations for both periods was primarily related to the allocation of income tax expense.

 

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Condensed Consolidated Results of Continuing Operations for the Six Months Ended June 30, 2018 Compared to the Six Months Ended June 30, 2017 (in thousands)

 

   Six Months Ended 
   June 30, 
   2018   2018   2017   2017 
                 
Revenue, net  $10,310    100.0%  $7,325    100.0%
Cost of revenue   4,827    46.8%   3,651    49.8%
Gross profit   5,483    53.2%   3,674    50.2%
Operating expenses:                    
Sales and marketing   4,086    39.6%   2,691    36.7%
Research and development   1,019    9.9%   719    9.8%
General and administrative   3,897    37.8%   4,315    58.9%
Acquisition related amortization expense   1,626    15.8%   1,626    22.2%
Change in fair value of contingent consideration   -    0.0%   (5,776)   -78.9%
Total operating expenses   10,628    103.1%   3,575    48.8%
                     
Operating (loss) income   (5,145)   -49.9%   99    1.4%
Interest expense   -    0.0%   (469)   -6.4%
Loss on extinguishment of debt   -    0.0%   (4,278)   -58.4%
Other income (expense), net   144    1.4%   (44)   -0.6%
Loss from continuing operations before tax   (5,001)   -48.5%   (4,692)   -64.1%
Provision (benefit) for income tax   14    0.1%   (298)   -4.1%
Loss from continuing operations   (5,015)   -48.6%   (4,394)   -60.0%
(Loss) income from discontinued operations, net of tax   (95)   -0.9%   502    6.9%
Net loss  $(5,110)   -49.6%  $(3,892)   -53.1%

 

Revenue, net

 

Consolidated revenue for the six months ended June 30, 2018 increased by $3.0 million, or 40.8%, to $10.3 million, compared to $7.3 million for the six months ended June 30, 2017.

 

This increase was principally attributable to increased test volume and commercial coverage for our thyroid tests and the change in revenue recognition under ASC 606 from cash basis to accrual of approximately $0.7 million for certain payer groups, as disclosed in the footnotes to the financial statements.

 

Cost of revenue

 

Consolidated cost of revenue for the six months ended June 30, 2018 increased by $1.2 million or 32.2% as compared to the same period in 2017. The primary reason for the increase was the increase in test volumes over the prior year. As a percentage of revenue, cost of revenue decreased to 46.8% as compared to 49.8% in the comparable prior year period due primarily to laboratory cost efficiencies relative to the increase in test volume and related revenues.

 

Gross profit

 

Gross profit, as a percentage of revenue, increased to 53.2% for the six months ended June 30, 2018 as compared to 50.2% for the six months ended June 30, 2017. This increase was also primarily due to laboratory cost efficiencies relative to the increase in test volume and related revenues.

 

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Sales and marketing expense

 

Sales and marketing expenses were $4.1 million for the six months ended June 30, 2018, and as a percentage of revenue was 39.6%. For the six months ended June 30, 2017, sales and marketing expenses were $2.7 million and 36.7% as a percentage of revenue. The increase in sales and marketing expense principally reflect an increase in salesforce costs as well as increased marketing spending.

 

Research and development

 

Research and development costs totaled $1.0 million for the six months ended June 30, 2018 and as a percentage of revenue were 9.9%. For the six months ended June 30, 2017 the expense was $0.7 million and as a percentage of revenue was 9.8%. The increase in research and development expenses was primarily due to an increase in certain costs that are internally allocated to Research and Development, as well as an increase in employee stock compensation costs affiliated with research and development personnel.

 

General and administrative

 

General and administrative expense for the six months ended June 30, 2018 was $3.9 million as compared to $4.3 million for the six months ended June 30, 2017. This decrease was primarily attributable to a comparable reduction in DOJ settlement expense totaling $1.1 million, partially offset by an increase in employee expenses of $0.6 million in the current year.

 

Acquisition related amortization expense

 

During both the six months ended June 30, 2018 and June 30, 2017, we recorded amortization expense of approximately $1.6 million.

 

Change in fair value of contingent consideration

 

During the six months ended June 30, 2017, there was a $5.8 million reduction in the contingent consideration liability as the result of the termination of the contingent consideration agreement with Redpath Equity Holders Representative, LLC, for amounts associated with future royalty payments for the assets acquired from Redpath, as disclosed in Note 14, Equity of the footnotes to the financial statements.

 

Operating (loss) income

 

We experienced an operating loss of $5.1 million for the six months ended June 30, 2018, and operating income of $0.1 million during the six months ended June 30, 2017. The operating income for the six months ended June 30, 2017 was primarily attributable to the reversal of our RedPath contingent consideration liability of $5.8 million. Without the reversal of contingent consideration, the operating income from continuing operations for the six months ended June 30, 2017 would have been an operating loss of $5.7 million.

 

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Provision (benefit) for income taxes

 

We had income tax expense of approximately $14,000 for the six months ended June 30, 2018 and an income tax benefit of approximately $0.3 million for the six months ended June 30, 2017. The income tax benefit for 2017 was primarily due to allocation of tax expense between continuing and discontinued operations.

 

(Loss) income from discontinued operations, net of tax

 

We had a loss from discontinued operations of $0.1 million for the six months ended June 30, 2018 and income from discontinued operations of $0.5 million for the six months ended June 30, 2017. The income from discontinued operations for the six months ended June 30, 2017 was primarily related to reversals of severance accruals.

 

LIQUIDITY AND CAPITAL RESOURCES

 

For the six months ended June 30, 2018, we had an operating loss of $5.1 million. As of June 30, 2018, we had cash and cash equivalents of $10.1 million, total current assets of $19.2 million and current liabilities of $7.4 million.

 

We intend to meet our capital needs by driving revenue growth, containing costs as well as exploring other options, including the possibility of raising additional debt or equity capital as necessary. There is, however, no guarantee that additional capital can be raised to fund our future operations.

 

During the six months ended June 30, 2018, net cash used in operating activities was $5.0 million, of which $4.6 million was used in continuing operations and $0.4 million was used in discontinued operations. The main component of cash used in operating activities during the six months ended June 30, 2018 was the net loss of $5.1 million. During the six months ended June 30, 2017, net cash used in operating activities was $8.6 million, of which $7.7 million was used in continuing operations and $0.9 million was used in discontinued operations. The main component of cash used in operating activities during the six months ended June 30, 2017 was a net loss of $3.9 million, a decrease in accrued payroll of $1.5 million and accounts payable of $1.4 million related to past due obligations from the prior year. For the six months ended June 30, 2018, there was $0.1 million of net cash used in investing activities for the purchase of lab and computer equipment. There was no cash used in investing activities for the six months ended June 30, 2017.

 

For the six months ended June 30, 2017, there was net cash provided from financing activities of $22.2 million, which resulted from the issuance of common stock in our four direct offerings completed in the first six months of 2017.

 

Inflation

 

We do not believe that inflation had a significant impact on our results of operations for the periods presented. On an ongoing basis, we attempt to minimize any effects of inflation on our operating results by controlling operating costs and whenever possible, seeking to insure that billing rates reflect increases in costs due to inflation.

 

Off-Balance Sheet Arrangements

 

None.

 

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Item 4. Controls and Procedures

 

Evaluation of disclosure controls and procedures

 

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act as of the end of the period covered by this Form 10-Q. In designing and 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 including that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In addition, management is required to apply its judgment in evaluating the benefits of possible disclosure controls and procedures relative to their costs to implement and maintain.

 

Based on the evaluation of the Company’s disclosure controls and procedures, as that term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, the Chief Executive Officer of the Company and the Chief Financial Officer of the Company have concluded that the Company’s disclosure controls and procedures are effective as of June 30, 2018.

 

Reference should be made to our most recent Annual Report on Form 10-K for additional information regarding discussion of the effectiveness of the Company’s controls and procedures.

 

Changes in internal controls

 

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II. OTHER INFORMATION

 

Item 1. Legal Proceedings

 

“Item 3- Legal Proceedings” of our most recent Annual Report on Form 10-K filed on March 23, 2018 includes a discussion of our legal proceedings, as does Note 6, Commitments and Contingencies, to the accompanying condensed consolidated financial statements. During the fiscal quarter ended June 30, 2018, there have been no material changes from the proceedings disclosed in our Form 10-K.

 

Item 1A. Risk Factors.

 

Not applicable as we are a smaller reporting company.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

On June 13th and 15th, 2018, the Company issued 325,000 shares of common stock in consideration of services to be rendered in respect of two consulting agreements it entered into during the quarter ended June 30, 2018. The issuances were exempt from registration pursuant to the Securities Act of 1933, as amended, pursuant to Section 4(a)(2) thereof.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

None.

 

Item 5. Other Information.

 

None.

 

Item 6. Exhibits

 

Exhibit No.   Description
     
31.1   Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
     
31.2   Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.
     
32.1+   Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.
     
32.2+   Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.
     
101   The following financial information from this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2018 formatted in XBRL (Extensible Business Reporting Language) and furnished electronically herewith: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statement of Stockholders’ Equity; (iv) the Condensed Consolidated Statements of Cash Flows; and (v) the Notes to Condensed Consolidated Financial Statements.
     
  + Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference to any registration statement or other document filed under the Securities Act or the Exchange Act, except as otherwise stated in any such filing.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: August 9, 2018 Interpace Diagnostics Group, Inc.
    (Registrant)
     
    /s/ Jack E. Stover
    Jack E. Stover
    President and Chief Executive Officer
    (Principal Executive Officer)
     
    /s/ James Early
    James Early
    Chief Financial Officer
    (Principal Financial Officer)

 

    /s/ Thomas Freeburg
    Thomas Freeburg
    Chief Accounting Officer
    (Principal Accounting Officer)

 

36
 

EX-31.1 2 ex31-1.htm

 

Exhibit 31.1

 

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

 

I, Jack E. Stover, certify that:

 

  1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 of Interpace Diagnostics Group, Inc. (the “registrant”);
     
  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 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, including its consolidated subsidiaries, 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 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 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 9, 2018 /s/ Jack E. Stover
    Chief Executive Officer
    (Principal Executive Officer)

 

 
 

 

EX-31.2 3 ex31-2.htm

 

Exhibit 31.2

 

CERTIFICATION PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

 

I, James Early, certify that:

 

  1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 of Interpace Diagnostics Group, Inc. (the “registrant”);
     
  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 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, including its consolidated subsidiaries, 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 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 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 9, 2018 /s/ James Early
    Chief Financial Officer
    (Principal Financial Officer)

 

 
 

 

EX-32.1 4 ex32-1.htm

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Interpace Diagnostics Group, Inc. (the “Company”) on form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jack E. Stover, as Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

 

  (1) 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.

 

Date: August 9, 2018 /s/ Jack E. Stover
    Chief Executive Officer
    (Principal Executive Officer)

 

 
 

 

EX-32.2 5 ex32-2.htm

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Interpace Diagnostics Group, Inc. (the “Company”) on form 10-Q for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James Early, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

 

  (1) 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.

 

Date: August 9, 2018 /s/ James Early
    Chief Financial Officer
    (Principal Financial Officer)

 

 
 

 

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Adoption of ASC Topic 606 [Member] Asuragen Acquisition [Member] Asuragen [Member] Balances without Adoption of ASC 606 [Member] Base &amp;amp; Overallotment Warrants[Member] Companys Counter-Claim Against Prolias [Member] Diagnostic Assets, Barrett's Test [Member] Diagnostic Assets [Member] Diagnostic Assets, Pancreas Test [Member] Diagnostic Assets, Thyroid [Member] Diagnostic Lab, CLIA Lab [Member] Effect of Change Higher/(Lower) [Member] Exchange Agreement [Member] July 1, 2018 [Member] July 1, 2019 [Member] March 23, 2017 and April 18, 2017 [Member] Options [Member] Disclosure of accounting policy for other current assets. Pittsburgh Lease [Member] Prefunded Warrants [Member] Private Placement Warrants[Member] RedPath Acquisition [Member] RedPath Debt Exchange and conversion of Senior Convertible Notes [Member] RedPath [Member] RedPath Warrants[Member] Reversal of severance accrual. Senior Convertible Notes [Member] Settlement Agreement [Member] Stock Incentive Plan [Member] Stock-Settled Stock Appreciation Rights (SARs) [Member] Underwriter Warrants[Member] Underwriter Warrants[Member] Vendor Warrants[Member] Warrants Issued [Member] Warrants [Member] Warrants [Text Block] Reversal of DOJ accrual. Warrant Liability. Amount of accretion of financial instrument classified as a liability measured using unobservable inputs that reflect the entity's own assumption about the assumptions market participants would use in pricing. Cancellation of Obligation / Conversions. Operating lease expire date description. Number of square foot for laboratory and office space. Prepaid stock grants issued to vendors. Termination Agreement [Member] RedPath Equityholder Representative, LLC [Member] Base Warrants [Member] Warrant term. Warrants exercise price description. Gross proceeds from warrants. Warraants classification. Expiration Date. Warrants Exercised. Line of credit net available receivables. Expansion capital. Restricted Stock Units (RSUs) [Member] Others accrued expenses current. Unclaimed property current. Warrant liability noncurrent. Warrants issued through Termination Agreement. Non-cash equity conversion costs. Settlement of the RedPath Note. Restricted Stock Units (RSUs) [Member] [Default Label] Assets Liabilities Treasury Stock, Value Stockholders' Equity Attributable to Parent Liabilities and Equity Gross Profit Operating Expenses Operating Income (Loss) Interest Expense, Debt Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest Income (Loss) from Continuing Operations, Net of Tax, Attributable to Parent Income (Loss) from Continuing Operations, Per Diluted Share Income (Loss) from Discontinued Operations and Disposal of Discontinued Operations, Net of Tax, Per Diluted Share Shares, Outstanding Treasury Stock, Value, Acquired, Cost Method Derivative, Gain (Loss) on Derivative, Net Increase (Decrease) in Other Current Assets Increase (Decrease) in Other Noncurrent Assets Net Cash Provided by (Used in) Operating Activities Payments to Acquire Property, Plant, and Equipment Net Cash Provided by (Used in) Investing Activities Payments for Repurchase of Common Stock Net Cash Provided by (Used in) Financing Activities Cash and Cash Equivalents, Period Increase (Decrease) WarrantsTextBlock Discontinued Operations, Policy [Policy Text Block] Revenues Business Combination, Contingent Consideration, Liability Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability Value Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Liability, Settlements Business Combination, Contingent Consideration, Liability, Current WarrantLiabilityNoncurrent Other Liabilities, Noncurrent Disposal Group, Including Discontinued Operation, Accounts Payable, Current Disposal Group, Including Discontinued Operation, Other Liabilities, Current Disposal Group, Including Discontinued Operation, Liabilities Debt Issuance Costs Incurred During Noncash or Partial Noncash Transaction Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Forfeited in Period Class of Warrant or Right, Outstanding EX-101.PRE 11 idxg-20180630_pre.xml XBRL PRESENTATION FILE XML 12 R1.htm IDEA: XBRL DOCUMENT v3.10.0.1
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2018
Aug. 03, 2018
Document And Entity Information    
Entity Registrant Name Interpace Diagnostics Group, Inc.  
Entity Central Index Key 0001054102  
Document Type 10-Q  
Document Period End Date Jun. 30, 2018  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   28,194,275
Trading Symbol IDXG  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2018  
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.10.0.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Current assets:    
Cash and cash equivalents $ 10,084 $ 15,199
Accounts receivable, net 7,647 3,437
Other current assets 1,474 1,172
Total current assets 19,205 19,808
Property and equipment, net 640 654
Other intangible assets, net 31,480 33,105
Other long-term assets 31 31
Total assets 51,356 53,598
Current liabilities:    
Accounts payable 1,173 391
Accrued salaries and bonus 938 1,394
Other accrued expenses 4,304 5,004
Current liabilities from discontinued operations 939 1,302
Total current liabilities 7,354 8,091
Contingent consideration 1,111 1,349
Other long-term liabilities 4,339 4,289
Total liabilities 12,804 13,729
Commitments and contingencies (Note 6)
Stockholders' equity:    
Preferred stock, $.01 par value; 5,000,000 shares authorized, no shares issued and outstanding
Common stock, $.01 par value; 100,000,000 shares authorized; 28,267,344 and 27,900,806 shares issued, respectively; 28,194,275 and 27,836,456 shares outstanding, respectively 282 278
Additional paid-in capital 174,360 173,062
Accumulated deficit (134,410) (131,800)
Treasury stock, at cost (73,069 and 64,350 shares, respectively) (1,680) (1,671)
Total stockholders' equity 38,552 39,869
Total liabilities and stockholders' equity $ 51,356 $ 53,598
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.10.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2018
Dec. 31, 2017
Statement of Financial Position [Abstract]    
Preferred stock, par value $ .01 $ .01
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 28,267,344 27,900,806
Common stock, shares outstanding 28,194,275 27,836,456
Treasury stock, shares 73,069 64,350
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.10.0.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Income Statement [Abstract]        
Revenue, net $ 5,501 $ 3,855 $ 10,310 $ 7,325
Cost of revenue (excluding amortization of $813 and $813 for the three months and $1,626 and $1,626 for the six months, respectively) 2,247 1,879 4,827 3,651
Gross profit 3,254 1,976 5,483 3,674
Operating expenses:        
Sales and marketing 2,095 1,555 4,086 2,691
Research and development 518 413 1,019 719
General and administrative 1,726 2,793 3,897 4,315
Acquisition related amortization expense 813 813 1,626 1,626
Change in fair value of contingent consideration (5,776)
Total operating expenses 5,152 5,574 10,628 3,575
Operating (loss) income (1,898) (3,598) (5,145) 99
Interest expense (216) (469)
Loss on extinguishment of debt (2,731) (4,278)
Other income (expense), net 33 (8) 144 (44)
Loss from continuing operations before tax (1,865) (6,553) (5,001) (4,692)
Provision (benefit) for income taxes 8 (301) 14 (298)
Loss from continuing operations (1,873) (6,252) (5,015) (4,394)
(Loss) income from discontinued operations, net of tax (44) (54) (95) 502
Net loss $ (1,917) $ (6,306) $ (5,110) $ (3,892)
Basic (loss) income per share of common stock:        
From continuing operations $ (0.07) $ (0.65) $ (0.18) $ (0.64)
From discontinued operations (0.00) (0.01) (0.00) 0.07
Net loss per basic share of common stock (0.07) (0.65) (0.18) (0.57)
Diluted (loss) income per share of common stock:        
From continuing operations (0.07) (0.65) (0.18) (0.64)
From discontinued operations (0.00) (0.01) (0.00) 0.07
Net loss per diluted share of common stock $ (0.07) $ (0.65) $ (0.18) $ (0.57)
Weighted average number of common shares and common share equivalents outstanding:        
Basic 27,933,000 9,657,000 27,894,000 6,877,000
Diluted 27,933,000 9,657,000 27,894,000 6,877,000
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.10.0.1
Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Income Statement [Abstract]        
Cost of revenue, amortization $ 813 $ 813 $ 1,626 $ 1,626
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.10.0.1
Condensed Consolidated Statements of Stockholder's Equity (Unaudited) - 6 months ended Jun. 30, 2018 - USD ($)
$ in Thousands
Common Stock [Member]
Treasury Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Total
Balance at Dec. 31, 2017 $ 278 $ (1,671) $ 173,062 $ (131,800) $ 39,869
Balance, shares at Dec. 31, 2017 27,901,000 64,000      
Common stock issued $ 4 282 286
Common stock issued, shares 366,000        
Treasury stock purchased $ (9) (9)
Treasury stock purchased, shares 9,000      
Stock-based compensation expense 1,016 1,016
Net loss (5,110) (5,110)
Adoption of ASC 606 2,500 2,500
Balance at Jun. 30, 2018 $ 282 $ (1,680) $ 174,360 $ (134,410) $ 38,552
Balance, shares at Jun. 30, 2018 28,267,000 73,000      
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.10.0.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Cash Flows Used in Operating Activities    
Net loss $ (5,110) $ (3,892)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 1,710 1,937
Interest accretion 1 271
Provision for bad debt 25
Amortization of debt issuance costs 117
Mark to market on derivatives 61
Reversal of severance accrual (2,034)
Reversal of DOJ accrual (350)
Mark to market on warrants (66) 76
Loss on extinguishment of debt 4,278
Stock-based compensation, consulting agreements 24  
Stock-based compensation 1,016 206
Change in fair value of contingent consideration (5,776)
Other changes in assets and liabilities:    
Increase in accounts receivable (1,710) (512)
(Increase) decrease in other current assets (40) 53
Decrease in other long-term assets 220
Increase (decrease) in accounts payable 782 (1,358)
Decrease in accrued salaries and bonus (456) (1,549)
Decrease in other accrued expenses (944) (789)
Increase in other long-term liabilities 116 94
Net cash used in operating activities (5,027) (8,572)
Cash Flows Used in Investing Activities    
Purchase of property and equipment (79)
Net cash used in investing activities (79)
Cash Flows Used in Financing Activities    
Issuance of common stock, net of expenses 22,263
Cash paid for repurchase of restricted shares (9) (28)
Net cash (used in) provided by financing activities (9) 22,235
Net (decrease) increase in cash and cash equivalents (5,115) 13,663
Cash and cash equivalents - beginning 15,199 602
Cash and cash equivalents - ending $ 10,084 $ 14,265
XML 19 R8.htm IDEA: XBRL DOCUMENT v3.10.0.1
Basis of Presentation
6 Months Ended
Jun. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation

1. BASIS OF PRESENTATION

 

The accompanying unaudited interim condensed consolidated financial statements and related notes (the “Interim Financial Statements”) should be read in conjunction with the consolidated financial statements of Interpace Diagnostics Group, Inc. (the “Company” or “Interpace”), and its wholly-owned subsidiaries, Interpace Diagnostics Lab Inc., Interpace Diagnostics Corporation and Interpace Diagnostics, LLC, and related notes as included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the U.S. Securities and Exchange Commission (“SEC”) on March 23, 2018. The condensed Interim Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The condensed Interim Financial Statements include all normal recurring adjustments that, in the judgment of management, are necessary for a fair presentation of such interim financial statements. Discontinued operations include the Company’s wholly owned subsidiaries: Group DCA, LLC, (“Group DCA”); InServe Support Solutions; and TVG, Inc. and its Commercial Services (“CSO”) business unit which was sold on December 22, 2015. All significant intercompany balances and transactions have been eliminated in consolidation. Operating results for the six-month period ended June 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2018.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.10.0.1
Liquidity
6 Months Ended
Jun. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Liquidity

2. LIQUIDITY

 

As of June 30, 2018, the Company had cash and cash equivalents of $10.1 million, net accounts receivable of $7.6 million, total current assets of $19.2 million and total current liabilities of $7.4 million. For the six months ended June 30, 2018, the Company had a net loss of $5.1 million and cash used in operating activities was $5.0 million.

 

The Company does not expect to generate positive cash flows from operations for the year ending December 31, 2018. The Company believes however, that it has sufficient cash balances to meet near term obligations and further intends to meet its capital needs by revenue growth, containing costs, entering into strategic alliances as well as exploring other options, including the possibility of raising additional debt or equity capital as necessary. There is, however, no assurance the Company will be successful in meeting its capital requirements prior to becoming cash flow positive.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Accounting Estimates

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experience, facts and circumstances available at the time, and various other assumptions that are believed to be reasonable under the circumstances. Significant estimates include accounting for valuation allowances related to deferred income taxes, contingent consideration, allowances for doubtful accounts, revenue recognition, unrecognized tax benefits, and asset impairments involving other intangible assets. The Company periodically reviews these matters and reflects changes in estimates in earnings as appropriate. Actual results could materially differ from those estimates.

 

Revenue Recognition

 

Our Services

 

We are a fully integrated commercial and bioinformatics company that develops and provides clinically useful molecular diagnostic tests and pathology services. We develop and commercialize molecular diagnostic tests and related first line assays principally focused on early detection of patients at high risk of cancer and leverage the latest technology and personalized medicine for improved patient diagnosis and management. We currently have four commercialized molecular diagnostic assays in the marketplace for which we are receiving reimbursement: PancraGEN®, which is a pancreatic cyst and pancreaticobiliary solid lesion molecular test that helps physicians better assess risk of pancreaticobiliary cancers using our proprietary PathFinderTG® platform; ThyGenX® (now known as ThyGeNEXT™), which is an oncogenic mutation panel that helps identify malignant thyroid nodules; ThyraMIR®, which assesses thyroid nodules for risk of malignancy utilizing a proprietary microRNA gene expression assay; and RespriDX™, launched in September 2017, for assessing metastatic versus primary lung cancer tumors. RespriDX™ also utilizes our PathFinderTG® platform and compares the genetic fingerprint of two or more sites of lung cancer to determine whether the neoplastic deposits are representative of a recurrence of cancer or a new primary (independent) cancer. We are also “soft launching” BarreGEN®, an esophageal cancer risk classifier for Barrett’s Esophagus that also utilizes our PathFinder TG® platform.

 

Adoption of Accounting Standards Codification Topic 606 (“ASC 606”), “Revenue from Contracts with Customers”

 

Effective January 1, 2018, the Company adopted ASC 606 which amends the guidance for the recognition of revenue from contracts with customers for the transfer of goods and services, by using the modified-retrospective method applied to any contracts that were not completed as of January 1, 2018. The results for the reporting period beginning after January 1, 2018, are presented in accordance with the new standard, although comparative information has not been restated and continues to be reported under the accounting standards and policies in effect for those periods.

 

Upon adoption, the Company performed a comprehensive analysis of existing revenue arrangements as of January 1, 2018 following the five-step model outlined in ASC 606. Based on our analysis, we recorded a cumulative adjustment to opening accumulated deficit and increase of accounts receivable of $2.5 million as of January 1, 2018. The cumulative impact was driven by a change in the timing of revenue recognition for certain payer categories and the related proprietary tests performed. The balance of accounts receivable related to the adjustment is approximately $0.9 million as of June 30, 2018.

 

The following tables present the effect of the adoption of ASC Topic 606 on our condensed consolidated balance sheet and revenue as of and for the six months ended June 30, 2018:

 

Consolidated Balance Sheet:

 

 

    June 30, 2018  
          (unaudited)        
    As reported     Balances without Adoption of ASC 606     Effect of Change
Higher/(Lower)
 
Accounts receivable, net   $ 7,647     $ 6,731     $ 916  
Accumulated deficit     (134,410 )     (136,910 )     (2,500 )

 

Revenue:

 

    For the six months ended June 30, 2018  
          (unaudited)        
    As reported     Balances without Adoption of ASC 606     Effect of Change
Higher/(Lower)
 
Revenue, net   $ 10,310     $ 9,580     $ 730  
                         

 

 

Historically, for certain third-party payers that did not have established contractual reimbursement rates or a predictable pattern of collectability, including commercial insurance carriers, Medicaid and certain direct-bill payers (primarily hospitals, but also laboratories), the Company previously recognized revenues when the fee was fixed or determinable and collectability was reasonably assured, which was upon request of third-party payer notification of payment or when cash was received. Under the new standard, the Company estimates the variable consideration within the transaction price for all third-party payers and proprietary tests and recognizes revenue as the Company satisfies its performance obligations.

 

In addition, the Company updated its estimates of the expected transaction price and related reimbursement rates for its payer categories and related proprietary tests based on the variable consideration guidance in ASC 606. This consisted of updating the reimbursement rates realized by the Company’s proprietary tests based on historical amounts received by each payer category for the corresponding tests performed.

 

Overall, other than an initial acceleration in the timing of our revenue recognition for certain payer categories, the adoption of this new standard will not have a significant impact on our reported total revenues and operating results as compared to amounts that would have been reported under the prior revenue recognition standard over our typical revenue cycle. Our accounting policies under the new standard were applied prospectively and are discussed further below.

 

Revenue Recognition after adoption of ASC 606

 

Upon adoption of ASC 606, the Company recognizes revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price using the expected value method based on historical experience.

 

The Company derives its revenues from the performance of its proprietary tests. The Company’s performance obligation is fulfilled upon completion, review and release of test results to the customer. The Company subsequently bills third-party payers or direct-bill payers for the proprietary tests performed. Revenue is recognized based on the estimated transaction price or net realizable value (“NRV”), which is determined based on historical collection rates by each payer category for each proprietary test offered by the Company. The Company regularly reviews the ultimate amounts received from the third-party payers and related estimated reimbursement rates and adjusts the NRV’s and related contractual allowances accordingly. If actual collections and related NRV’s vary from our estimates, we will adjust the estimates of contractual allowances, which would affect net revenue in the period such variances become known.

 

Disaggregated Revenues

 

We operate in a single operating segment and, therefore, the results of our operations are reported on a consolidated basis for purposes of segment reporting, which is consistent with internal management reporting. For the six-month periods ended June 30, 2018 and June 30, 2017, the majority of the Company’s revenues were derived from its molecular diagnostic tests.

 

Financing and Payment

 

Our payment terms vary by third-party payers and type of proprietary testing services performed. The term between invoicing and when payment is due is not significant.

 

Costs to Obtain or Fulfill a Customer Contract

 

Sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded in sales and marketing expense in the condensed consolidated statements of operations.

 

Accounts Receivable

 

The Company’s accounts receivable represent unconditional rights to consideration and are generated using its proprietary tests. The Company’s services are fulfilled upon completion of the test, review and release of the test results. In conjunction with fulfilling these services, the Company bills the third-party payer or direct-bill payer. Prior to the adoption of ASC 606 on January 1, 2018, the Company recognized accounts receivable related to billings for Medicare, Medicare Advantage, and direct-bill payers on an accrual basis, net of contractual adjustment, when collectability was reasonably assured. Under ASC 606 accounts receivable is now recognized for all payer groups, net of contractual adjustment and net of estimated uncollectable amounts. Contractual adjustments represent the difference between the list prices and the reimbursement rates set by third party payers, including Medicare, commercial payers, and amounts billed to direct-bill payers. Specific accounts may be written off after several appeals, which in some cases may take longer than twelve months.

 

Other Current Assets

 

Other current assets consisted of the following as of June 30, 2018 and December 31, 2017:

 

    June 30, 2018     December 31, 2017  
    (unaudited)        
             
Indemnification asset   $ 875     $ 875  
Prepaid assets     556       266  
Other     43       31  
    $ 1,474     $ 1,172  

 

Long-Lived Assets, including Finite-Lived Intangible Assets

 

Finite-lived intangible assets are stated at cost less accumulated amortization. Amortization of finite-lived acquired intangible assets is recognized on a straight-line basis, using the estimated useful lives of the assets of approximately two years to nine years in acquisition related amortization expense in the condensed consolidated statements of operations.

 

The Company reviews the recoverability of long-lived assets and finite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, an impairment loss is recognized by reducing the recorded value of the asset to its fair value measured by future discounted cash flows. This analysis requires estimates of the amount and timing of projected cash flows and, where applicable, judgments associated with, among other factors, the appropriate discount rate. Such estimates are critical in determining whether any impairment charge should be recorded and the amount of such charge if an impairment loss is deemed to be necessary.

 

Discontinued Operations

 

The Company accounts for business dispositions and its businesses held for sale in accordance with ASC 205-20, Discontinued Operations (“ASC 205-20”). ASC 205-20 requires the results of operations of business dispositions to be segregated from continuing operations and reflected as discontinued operations in current and prior periods. See Note 11, Discontinued Operations for further information.

 

Basic and Diluted Net Loss per Share

 

A reconciliation of the number of shares of common stock used in the calculation of basic and diluted loss per share for the three- and six-month periods ended June 30, 2018 and 2017 is as follows:

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2018     2017     2018     2017  
    (unaudited)  
                         
Basic weighted average number of common shares     27,933       9,657       27,894       6,877  
Potential dilutive effect of stock-based awards     -       -       -       -  
Diluted weighted average number of common shares     27,933       9,657       27,894       6,877  

 

The following outstanding stock-based instruments were excluded from the computation of the effect of dilutive securities on loss per share for the following periods because they would have been anti-dilutive:

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2018     2017     2018     2017  
    (unaudited)  
                         
Options     2,256       323       2,256       323  
Stock-settled stock appreciation rights (SARs)     59       85       59       85  
Restricted stock units (RSUs)     220       68       220       68  
Warrants     13,542       17,105       13,542       17,105  
      16,077       17,581       16,077       17,581  

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.10.0.1
Other Intangible Assets
6 Months Ended
Jun. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Other Intangible Assets

4. OTHER INTANGIBLE ASSETS

 

The net carrying value of the identifiable intangible assets as of June 30, 2018 and December 31, 2017 are as follows:

 

          As of June 30, 2018     As of December 31, 2017  
          (unaudited)        
    Life     Carrying     Carrying  
    (Years)     Amount     Amount  
Diagnostic assets:                        
Asuragen acquisition:                        
Thyroid     9     $ 8,519     $ 8,519  
RedPath acquisition:                        
Pancreas test     7       16,141       16,141  
Barrett’s test     9       18,351       18,351  
Total           $ 43,011     $ 43,011  
Diagnostic lab:                        
CLIA Lab     2.3     $ 609     $ 609  
                         
Accumulated Amortization           $ (12,140 )   $ (10,515 )
                         
Net Carrying Value           $ 31,480     $ 33,105  

 

Amortization expense was approximately $0.8 million for the three-month periods ended June 30, 2018 and 2017, respectively, and approximately $1.6 million for the six-month periods ended June 30, 2018 and 2017, respectively. Amortization of our diagnostic assets begins upon launch of the product. Estimated amortization expense for the next five years is as follows, based on current assumptions of future product launches:

 

2018     2019     2020     2021     2022  
$ 3,252     $ 5,292     $ 5,292     $ 4,908     $ 2,987  

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.10.0.1
Fair Value Measurements
6 Months Ended
Jun. 30, 2018
Fair Value Disclosures [Abstract]  
Fair Value Measurements

5. FAIR VALUE MEASUREMENTS

 

Cash and cash equivalents, accounts receivable, and accounts payable approximate fair value due to their relative short-term nature. The Company’s financial liabilities reflected at fair value in the condensed consolidated financial statements include contingent consideration and warrant liability. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including the market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based upon observable inputs used in the valuation techniques, the Company is required to provide information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values into three broad levels as follows:

 

  Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.
     
  Level 2: Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.
     
  Level 3: Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

 

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The valuation methodologies used for the Company’s financial instruments measured on a recurring basis at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, are set forth in the tables below:

 

    As of June 30, 2018     Fair Value Measurements  
    Carrying     Fair     As of June 30, 2018  
    Amount     Value     Level 1     Level 2     Level 3  
    (unaudited)  
Liabilities:                                        
Contingent consideration:                                        
Asuragen (1)   $ 1,427     $ 1,427     $ -     $ -     $ 1,427  
Other long-term liabilities:                                        
Warrant liability (2)     407       407       -       -       407  
    $ 1,834     $ 1,834     $ -     $ -     $ 1,834  

 

    As of December 31, 2017     Fair Value Measurements  
    Carrying     Fair     As of December 31, 2017  
    Amount     Value     Level 1     Level 2     Level 3  
Liabilities:                                        
Contingent consideration:                                        
Asuragen (1)   $ 1,581     $ 1,581     $ -     $ -     $ 1,581  
Other long-term liabilities:                                        
Warrant liability (2)     473       473       -       -       473  
    $ 2,054     $ 2,054     $ -     $ -     $ 2,054  

 

(1)(2) See Note 7, Accrued Expenses and Long-Term Liabilities

 

In connection with the acquisition of certain assets from Asuragen, the Company recorded contingent consideration related to contingent payments and other revenue-based payments. The Company determined the fair value of the contingent consideration based on a probability-weighted income approach derived from revenue estimates. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement.

 

On June 21, 2017, the Company closed on a public offering issuing both Pre-Funded Warrants and Underwriters Warrants to purchase 2,600,000 shares and 575,000 shares of the Company’s common stock, respectively. Both the Pre-Funded and Underwriters Warrants include a cash settlement feature in the event of certain circumstances. Accordingly, both the Pre-Funded and Underwriters Warrants are classified as liabilities and were fair valued using the Black Scholes Option-Pricing Model, the inputs for which included exercise price of the respective warrants, market price of the underlying common shares, expected term, volatility based on the Company’s historical market price, and the risk-free rate corresponding to the expected term of the underlying agreement. Changes to the fair value of the warrant liabilities are recorded in Other income (expense), net. The Pre-Funded Warrants were fully exercised in 2017 and therefore the Company has no remaining liability associated with those warrants.

 

A roll forward of the carrying value of the Contingent consideration liability and the Underwriters’ Warrant to June 30, 2018 is as follows:

 

                      Cancellation     Mark to        
    December 31,                 of Obligation/     Market     June 30,  
    2017     Payments     Accretion     Conversions     Adjustment     2018  
    (unaudited)  
                                     
Asuragen   $ 1,581     $ (155 )   $ 1     $ -     $ -     $ 1,427  
                                                 
Underwriters Warrant     473       -               -       (66 )     407  
    $ 2,054     $ (155 )   $ 1     $ -     $ (66 )   $ 1,834  

 

Certain of the Company’s non-financial assets, such as other intangible assets, are re-measured at fair value on a nonrecurring basis, if and when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies
6 Months Ended
Jun. 30, 2018
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

6. COMMITMENTS AND CONTINGENCIES

 

Litigation

 

Due to the nature of the businesses in which the Company is engaged it is subject to certain risks. Such risks include, among others, risk of liability for personal injury or death to persons using products the Company promotes or commercializes. There can be no assurance that substantial claims or liabilities will not arise in the future due to the nature of the Company’s business activities and recent increases in litigation related to healthcare products.

 

The Company could also be held liable for errors and omissions of its employees in connection with the services it performs that are outside the scope of any indemnity or insurance policy. The Company could be materially adversely affected if it were required to pay damages or incur defense costs in connection with a claim that is outside the scope of an indemnification agreement; if the indemnity, although applicable, is not performed in accordance with its terms; or if the Company’s liability exceeds the amount of applicable insurance or indemnity.

 

As of June 30, 2018, the Company’s accrual for litigation and threatened litigation was not material to the condensed consolidated financial statements.

  

RedPath – DOJ Settlement

 

In connection with the October 31, 2014 acquisition of RedPath Integrated Pathology, Inc., (“RedPath”), the Company assumed a liability for the settlement agreement entered into by the former owners of RedPath with the Department of Justice (“DOJ”). Under the terms of the settlement agreement, the Company was obligated to make payments to the DOJ for the calendar years ended December 31, 2014 through 2017, up to a maximum of $3.0 million. Payments were due on March 31st following the calendar year in which the revenue milestones were achieved. The Company made payments totaling $0.5 million during the year ended December 31, 2017 related to fiscal 2016 and had accrued $0.5 million for its potential liability for fiscal 2017, the final year of the settlement agreement. During the second quarter of 2018, the Company entered into an agreement with the DOJ to settle in full the outstanding fiscal 2017 liability at approximately $0.15 million and paid this amount as the final settlement payment in July 2018.

 

Prolias Technologies, Inc. v. PDI, Inc.

 

On April 8, 2015, Prolias Technologies, Inc. (“Prolias”) filed a complaint (the “Complaint”) against the Company with the Superior Court of New Jersey (Morris County) (the “Court”) in a matter entitled Prolias Technologies, Inc. v. PDI, Inc. In the Complaint, Prolias alleged that it and the Company entered into an August 19, 2013 collaboration agreement and an amendment thereto (collectively, the “Agreement”) whereby Prolias and the Company agreed to work in good faith to commercialize a diagnostic test known as “Thymira.” On March 9, 2017, the Court entered a final judgment in the Company’s favor against Prolias for the sum of $636,053 plus ten percent interest continuing to accrue on the principal balance of $500,000 unless and until paid. Final judgment was also entered in the Company’s favor and against Prolias, declaring Prolias is deemed to have executed and delivered to the Company a promissory note in the amount of $1,000,000 and Prolias is obligated to repay the Company the principal amount and all interest in accordance with the terms of the promissory note and the Agreement. On April 3, 2017, the final judgment against Prolias was recorded as a statewide lien. The Company has not recovered on the judgment against Prolias and no assurance can be given that the Company will ever be able to recover on the judgment in the future.

 

Pittsburgh Lease

 

On March 15, 2018, the Company amended the lease for its Pittsburgh laboratory to extend it through June 30, 2023. The lease is for 20,000 square feet of laboratory and office space, with monthly base rent of $33,333 beginning July 1, 2018, escalating by twenty-five percent (25%) on July 1, 2019 to $41,667 per month. The Company may, at its option, extend the term of the Lease for two consecutive terms of five years each, with the monthly base rent escalating by ten percent (10%) for each of the additional five year terms.

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.10.0.1
Accrued Expenses and Long-Term Liabilities
6 Months Ended
Jun. 30, 2018
Payables and Accruals [Abstract]  
Accrued Expenses and Long-Term Liabilities

7. ACCRUED EXPENSES AND LONG-TERM LIABILITIES

 

Other accrued expenses consisted of the following as of June 30, 2018 and December 31, 2017:

 

    June 30, 2018     December 31, 2017  
      (unaudited)          
                 
Accrued royalties   $ 573     $ 296  
Indemnification liability     875       875  
Contingent consideration     316       232  
DOJ settlement     150       500  
Accrued professional fees     690       700  
Taxes payable     471       515  
Unclaimed property     565       565  
All others     664       1,321  
    $ 4,304     $ 5,004  

 

Long-term liabilities consisted of the following as of June 30, 2018 and December 31, 2017:

 

    June 30, 2018     December 31, 2017  
    (unaudited)        
             
Warrant liability   $ 407     $ 473  
Uncertain tax positions     3,838       3,734  
Other     94       82  
    $ 4,339     $ 4,289  

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock-Based Compensation
6 Months Ended
Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation

8. STOCK-BASED COMPENSATION

 

Stock Incentive Plan

 

The Company’s stock-incentive program is a long-term retention program that is intended to attract, retain and provide incentives for talented employees, officers and directors, and to align stockholder and employee interests. Currently, the Company is able to grant options, SARs and restricted shares from the Interpace Diagnostics Group, Inc. Amended and Restated 2004 Stock Award and Incentive Plan, (the “Amended 2004 Plan”). Unless earlier terminated by action of its Board of Directors, the Amended 2004 Plan will remain in effect until such time as no stock remains available for delivery and the Company has no further rights or obligations under the Amended 2004 Plan with respect to outstanding awards thereunder.

 

Historically, stock options have been granted with an exercise price equal to the market value of the common stock on the date of grant, expire 10 years from the date they are granted, and generally vested over a one to three-year period for employees and members of the Board of Directors. Upon exercise, new shares will be issued by the Company. The Company granted stock options in 2017 which vest monthly over a one-year period. SARs are generally granted with a grant price equal to the market value of the common stock on the date of grant, vest one-third each year on the anniversary of the date of grant and expire five years from the date of grant. The restricted shares and restricted stock units granted to employees generally have a three-year graded vesting period and are subject to accelerated vesting and forfeiture under certain circumstances. Restricted shares and restricted stock units granted to board members generally have a three-year graded vesting period and are subject to accelerated vesting and forfeiture under certain circumstances.

 

During March 2018, the Company’s Chief Executive Officer, Chief Financial Officer, senior executives and members of the Board were granted incentive stock options to purchase an aggregate of 745,600 shares of common stock with an exercise price of $1.01 per share and 186,400 RSUs, (subject generally to the executive’s or board member’s, as applicable, continued service with the Company), which vest one-third each year over a period of three years.

 

The following table provides the weighted average assumptions used in determining the fair value of the stock option awards granted during the six-month periods ended June 30, 2018 and 2017.

 

    Six Months Ended  
    June 30, 2018     June 30, 2017  
    (unaudited)  
             
Risk-free interest rate     2.65 %     1.96 %
Expected life     6.00       4.91  
Expected volatility     126.93 %     138.71 %
Dividend yield     -       -  

 

The Company recognized approximately $0.4 million and $0.1 million of stock-based compensation expense during the three-month periods ended June 30, 2018 and 2017, respectively, and approximately $1.0 million and $0.2 million for the six month periods ended June 30, 2018 and 2017, respectively.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.10.0.1
Income Taxes
6 Months Ended
Jun. 30, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

9. INCOME TAXES

 

Generally, accounting standards require companies to provide for income taxes each quarter based on their estimate of the effective tax rate for the full year. The authoritative guidance for accounting for income taxes allows use of the discrete method when it provides a better estimate of income tax expense. Due to the Company’s valuation allowance position, it is the Company’s position that the discrete method provides a more accurate estimate of income tax expense and therefore income tax expense for the current quarter has been presented using the discrete method. As the year progresses, the Company refines its estimate based on the facts and circumstances by each tax jurisdiction. The following table summarizes income tax expense on (loss) income from continuing operations and the effective tax rate for the three- and six-month periods ended June 30, 2018 and 2017:

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2018     2017     2018     2017  
    (unaudited)     (unaudited)  
                         
Provision (benefit) from income tax   $ 8     $ (301 )   $ 14     $ (298 )
Effective income tax rate     (0.4 )%     4.6 %     (0.3 )%     6.4 %

 

Income tax expense for the three- and six-month periods ended June 30, 2018 was primarily due to minimum state and local taxes.

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.10.0.1
Segment Information
6 Months Ended
Jun. 30, 2018
Segment Reporting [Abstract]  
Segment Information

10. SEGMENT INFORMATION

 

Since December 22, 2015, the Company reports its operations as one segment, molecular diagnostics and bioinformatics. The Company’s reporting segment structure is reflective of the way both the Company’s management and chief operating decision maker view the business, make operating decisions and assess performance. This structure allows investors to better understand Company performance, better assess prospects for future cash flows, and make more informed decisions about the Company.

 

The Company’s molecular diagnostics and bioinformatics business focuses on developing and commercializing molecular diagnostic tests, leveraging the latest technology and personalized medicine for better patient diagnosis and management. Through the Company’s business, the Company aims to provide physicians and patients with diagnostic options for detecting genetic and other molecular alterations that are associated with gastrointestinal, endocrine and lung cancers, which are principally focused on early detection of patients at high risk of cancer. Customers in the Company’s segment consist primarily of physicians, hospitals and clinics. The service offerings throughout the segment have similar long-term average gross margins, contract terms, types of customers and regulatory environments. They are promoted through one centrally managed marketing group and the chief operating decision maker views their results on a combined basis.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.10.0.1
Discontinued Operations
6 Months Ended
Jun. 30, 2018
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations

11. DISCONTINUED OPERATIONS

 

The components of liabilities classified as discontinued operations relate to Commercial Services and consist of the following as of June 30, 2018 and December 31, 2017:

 

    June 30, 2018     December 31, 2017  
    (unaudited)        
             
Accounts payable   $ 192     $ 192  
Other     747       1,110  
Current liabilities from discontinued operations     939       1,302  
Total liabilities   $ 939     $ 1,302  

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.10.0.1
Long-Term Debt
6 Months Ended
Jun. 30, 2018
Debt Disclosure [Abstract]  
Long-Term Debt

12. LONG-TERM DEBT

 

As more fully described in our Form 10-K filed on March 23, 2018, during the first six months of fiscal 2017 the Company entered into an Exchange Agreement related to its debt with an investor. The Company exchanged (the “RedPath Debt Exchange”) such then-existing debt for senior convertible notes (“Senior Convertible Notes”) of the Company on March 22, 2017. Subsequently between March 23, 2017 and April 18, 2017, the Senior Convertible Notes were converted into 3,795,429 shares of the Company’s common stock. The Company recorded a loss of $4.3 million in 2017 as a result of the exchange.

 

The Company has no long-term debt.

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.10.0.1
Supplemental Cash Flow Information
6 Months Ended
Jun. 30, 2018
Supplemental Cash Flow Elements [Abstract]  
Supplemental Cash Flow Information

  13. SUPPLEMENTAL CASH FLOW INFORMATION

 

The following table presents cash flows used in the Company’s discontinued operations for the six months ended June 30, 2018 and 2017:

 

    Six Months Ended  
    June 30,  
    2018     2017  
    (unaudited)  
Net cash used in operating activities of discontinued operations   $ (354 )   $ (883 )
                 

 

Supplemental Cash Flow Information

(in thousands)

 

    Six Months Ended  
    June 30,  
    2018     2017  
    (unaudited)  
Operating                
Adoption of ASC 606   $ 2,500     $ -  
Prepaid stock grants issued to vendors   $ 286     $ -  
                 
Investing                
Acquisition of property and equipment in other accrued expenses   $ 46     $ -  
                 
Financing                
Settlement of the RedPath Note   $ -     $ (8,098 )
Issuance of the Exchange Notes   $ -     $ 11,375  
Non-cash equity conversion costs   $ -     $ (173 )
Debt issuance costs   $ -     $ (511 )
Warrants issued through Termination Agreement*   $ -     $ 193  
Common shares issued in debt exchange   $ -     $ 8,869  

 

*See Note 14, Equity

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.10.0.1
Equity
6 Months Ended
Jun. 30, 2018
Equity [Abstract]  
Equity

14. EQUITY

 

As more fully described in our Form 10-K filed on March 23, 2018, during the first quarter of fiscal 2017 the Company issued 2,793,000 common shares and 855,000 warrants for gross proceeds amounting to $12.2 million. In addition, as described in Note 12, Long-Term Debt, the Company issued 3,795,429 common shares in connection with the RedPath Debt Exchange and conversion of Senior Convertible Notes. As part of the Debt Exchange, the Company entered into a Termination Agreement with RedPath Equityholder Representative, LLC, terminating milestone and royalty payments and issued 5 year warrants to acquire an aggregate of 100,000 shares of the Company’s common stock at a fixed price of $4.69 per share.

 

During the second quarter of 2017, the Company completed a public offering of (i) 9,900,000 shares of the Company’s common stock (the “Firm Shares”), (ii) warrants to purchase 12,500,000 shares of Common Stock at an exercise price equal to $1.25 per share (the “Base Warrants”) and (iii) warrants to purchase 2,600,000 shares of Common Stock at an exercise price equal to $0.01 per share (the “Pre-Funded Warrants”). Each Firm Share and accompanying Base Warrant was sold for a combined effective price of $1.10, and each Pre-Funded Warrant and accompanying Base Warrant was sold for a combined effective price of $1.09. The issuance of the Firm Shares and the Pre-Funded Warrants resulted in combined gross proceeds of the offering totaling $13.7 million, with approximately $12.3 million of net funds available to the Company after deducting underwriting discounts and other stock issuance expenses.

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.10.0.1
Warrants
6 Months Ended
Jun. 30, 2018
Warrants  
Warrants

15. WARRANTS

 

There was no warrant activity for the six months ended June 30, 2018. Warrants outstanding for the period ended June 30, 2018 are as follows:

 

Description   Classification   Exercise Price     Expiration Date   Warrants Issued     Warrants Exercised     Warrants Cancelled/ Expired    

Balance

December 31, 2017

   

Balance

June 30,

2018

 
                                             
Private Placement Warrants, issued January 25, 2017   Equity   $ 4.69     June 2022     855,000       -       -       855,000       855,000  
RedPath Warrants, issued March 22, 2017   Equity   $ 4.69     September 2022     100,000       -       -       100,000       100,000  
Pre-Funded Warrants, issued June 21, 2017   Liability   $ 0.01     None     2,600,000       (2,600,000 )     -       -       -  
Underwriters Warrants, issued June 21, 2017   Liability   $ 1.32     December 2022     575,000       -       (40,000 )     535,000       535,000  
Base & Overallotment Warrants, issued June 21, 2017   Equity   $ 1.25     June 2022     14,375,000       (5,672,852 )     -       8,702,148       8,702,148  
Vendor Warrants, issued August 6, 2017   Equity   $ 1.25     August 2020     150,000       -       -       150,000       150,000  
Warrants issued October 12, 2017   Equity   $ 1.80     April 2022     3,200,000       -       -       3,200,000       3,200,000  
                                                         
                      21,855,000       (8,272,852 )     (40,000 )     13,542,148       13,542,148  

XML 34 R23.htm IDEA: XBRL DOCUMENT v3.10.0.1
Recent Accounting Pronouncements
6 Months Ended
Jun. 30, 2018
Accounting Changes and Error Corrections [Abstract]  
Recent Accounting Pronouncements

16. RECENT ACCOUNTING PRONOUNCEMENTS

 

Recently adopted standards

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers,” previously defined in Note 3 as “ASC 606”. The standard, including subsequently issued amendments, replaces most existing revenue recognition guidance in U.S. GAAP. The key focus of the new standard is that an entity should recognize revenue to depict the transfer of promised 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. To achieve this key focus, there is a five-step approach outlined in the standard. We adopted this new standard as of January 1, 2018, by using the modified-retrospective method. See Note 3, Summary of Significant Accounting Policies, for further details.

 

New standards not yet adopted

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which when effective will require organizations that lease assets (e.g., through “leases”) to recognize assets and liabilities for the rights and obligations created by the leases on the balance sheet. A lessee will be required to recognize assets and liabilities for leases with terms that exceed twelve months. The standard will also require disclosures to help investors and financial statement users better understand the amount, timing and uncertainty of cash flows arising from leases. The disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements. The guidance is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial position and results of operations.

XML 35 R24.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events
6 Months Ended
Jun. 30, 2018
Subsequent Events [Abstract]  
Subsequent Events

17. SUBSEQUENT EVENTS

 

Nasdaq Correspondence

 

On May 4, 2018, the Company was notified by NASDAQ that we were no longer in compliance with the minimum bid price requirements of NASDAQ for continued listing and that we had until October 31, 2018 to regain compliance with this requirement or face delisting. On July 30, 2018 NASDAQ notified the Company that effective July 27, 2018 the Company was in compliance with the minimum bid price requirements of NASDAQ and the matter was determined to be closed.

 

Line of credit

 

Effective July 2018, the Company signed a letter of intent with Silicon Valley Bank to provide up to a 3-year $4,000,000 line of credit based on 80% of net available receivables, including a term portion of $850,000 to support capital expansions.

XML 36 R25.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Accounting Estimates

Accounting Estimates

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experience, facts and circumstances available at the time, and various other assumptions that are believed to be reasonable under the circumstances. Significant estimates include accounting for valuation allowances related to deferred income taxes, contingent consideration, allowances for doubtful accounts, revenue recognition, unrecognized tax benefits, and asset impairments involving other intangible assets. The Company periodically reviews these matters and reflects changes in estimates in earnings as appropriate. Actual results could materially differ from those estimates.

Revenue Recognition

Revenue Recognition

 

Our Services

 

We are a fully integrated commercial and bioinformatics company that develops and provides clinically useful molecular diagnostic tests and pathology services. We develop and commercialize molecular diagnostic tests and related first line assays principally focused on early detection of patients at high risk of cancer and leverage the latest technology and personalized medicine for improved patient diagnosis and management. We currently have four commercialized molecular diagnostic assays in the marketplace for which we are receiving reimbursement: PancraGEN®, which is a pancreatic cyst and pancreaticobiliary solid lesion molecular test that helps physicians better assess risk of pancreaticobiliary cancers using our proprietary PathFinderTG® platform; ThyGenX® (now known as ThyGeNEXT™), which is an oncogenic mutation panel that helps identify malignant thyroid nodules; ThyraMIR®, which assesses thyroid nodules for risk of malignancy utilizing a proprietary microRNA gene expression assay; and RespriDX™, launched in September 2017, for assessing metastatic versus primary lung cancer tumors. RespriDX™ also utilizes our PathFinderTG® platform and compares the genetic fingerprint of two or more sites of lung cancer to determine whether the neoplastic deposits are representative of a recurrence of cancer or a new primary (independent) cancer. We are also “soft launching” BarreGEN®, an esophageal cancer risk classifier for Barrett’s Esophagus that also utilizes our PathFinder TG® platform.

 

Adoption of Accounting Standards Codification Topic 606 (“ASC 606”), “Revenue from Contracts with Customers”

 

Effective January 1, 2018, the Company adopted ASC 606 which amends the guidance for the recognition of revenue from contracts with customers for the transfer of goods and services, by using the modified-retrospective method applied to any contracts that were not completed as of January 1, 2018. The results for the reporting period beginning after January 1, 2018, are presented in accordance with the new standard, although comparative information has not been restated and continues to be reported under the accounting standards and policies in effect for those periods.

 

Upon adoption, the Company performed a comprehensive analysis of existing revenue arrangements as of January 1, 2018 following the five-step model outlined in ASC 606. Based on our analysis, we recorded a cumulative adjustment to opening accumulated deficit and increase of accounts receivable of $2.5 million as of January 1, 2018. The cumulative impact was driven by a change in the timing of revenue recognition for certain payer categories and the related proprietary tests performed. The balance of accounts receivable related to the adjustment is approximately $0.9 million as of June 30, 2018.

 

The following tables present the effect of the adoption of ASC Topic 606 on our condensed consolidated balance sheet and revenue as of and for the six months ended June 30, 2018:

 

Consolidated Balance Sheet:

 

 

    June 30, 2018  
          (unaudited)        
    As reported     Balances without Adoption of ASC 606     Effect of Change
Higher/(Lower)
 
Accounts receivable, net   $ 7,647     $ 6,731     $ 916  
Accumulated deficit     (134,410 )     (136,910 )     (2,500 )

 

Revenue:

 

    For the six months ended June 30, 2018  
          (unaudited)        
    As reported     Balances without Adoption of ASC 606     Effect of Change
Higher/(Lower)
 
Revenue, net   $ 10,310     $ 9,580     $ 730  
                         

 

 

Historically, for certain third-party payers that did not have established contractual reimbursement rates or a predictable pattern of collectability, including commercial insurance carriers, Medicaid and certain direct-bill payers (primarily hospitals, but also laboratories), the Company previously recognized revenues when the fee was fixed or determinable and collectability was reasonably assured, which was upon request of third-party payer notification of payment or when cash was received. Under the new standard, the Company estimates the variable consideration within the transaction price for all third-party payers and proprietary tests and recognizes revenue as the Company satisfies its performance obligations.

 

In addition, the Company updated its estimates of the expected transaction price and related reimbursement rates for its payer categories and related proprietary tests based on the variable consideration guidance in ASC 606. This consisted of updating the reimbursement rates realized by the Company’s proprietary tests based on historical amounts received by each payer category for the corresponding tests performed.

 

Overall, other than an initial acceleration in the timing of our revenue recognition for certain payer categories, the adoption of this new standard will not have a significant impact on our reported total revenues and operating results as compared to amounts that would have been reported under the prior revenue recognition standard over our typical revenue cycle. Our accounting policies under the new standard were applied prospectively and are discussed further below.

 

Revenue Recognition after adoption of ASC 606

 

Upon adoption of ASC 606, the Company recognizes revenue when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price using the expected value method based on historical experience.

 

The Company derives its revenues from the performance of its proprietary tests. The Company’s performance obligation is fulfilled upon completion, review and release of test results to the customer. The Company subsequently bills third-party payers or direct-bill payers for the proprietary tests performed. Revenue is recognized based on the estimated transaction price or net realizable value (“NRV”), which is determined based on historical collection rates by each payer category for each proprietary test offered by the Company. The Company regularly reviews the ultimate amounts received from the third-party payers and related estimated reimbursement rates and adjusts the NRV’s and related contractual allowances accordingly. If actual collections and related NRV’s vary from our estimates, we will adjust the estimates of contractual allowances, which would affect net revenue in the period such variances become known.

 

Disaggregated Revenues

 

We operate in a single operating segment and, therefore, the results of our operations are reported on a consolidated basis for purposes of segment reporting, which is consistent with internal management reporting. For the six-month periods ended June 30, 2018 and June 30, 2017, the majority of the Company’s revenues were derived from its molecular diagnostic tests.

 

Financing and Payment

 

Our payment terms vary by third-party payers and type of proprietary testing services performed. The term between invoicing and when payment is due is not significant.

 

Costs to Obtain or Fulfill a Customer Contract

 

Sales commissions are expensed when incurred because the amortization period would have been one year or less. These costs are recorded in sales and marketing expense in the condensed consolidated statements of operations.

Accounts Receivable

Accounts Receivable

 

The Company’s accounts receivable represent unconditional rights to consideration and are generated using its proprietary tests. The Company’s services are fulfilled upon completion of the test, review and release of the test results. In conjunction with fulfilling these services, the Company bills the third-party payer or direct-bill payer. Prior to the adoption of ASC 606 on January 1, 2018, the Company recognized accounts receivable related to billings for Medicare, Medicare Advantage, and direct-bill payers on an accrual basis, net of contractual adjustment, when collectability was reasonably assured. Under ASC 606 accounts receivable is now recognized for all payer groups, net of contractual adjustment and net of estimated uncollectable amounts. Contractual adjustments represent the difference between the list prices and the reimbursement rates set by third party payers, including Medicare, commercial payers, and amounts billed to direct-bill payers. Specific accounts may be written off after several appeals, which in some cases may take longer than twelve months.

Other Current Assets

Other Current Assets

 

Other current assets consisted of the following as of June 30, 2018 and December 31, 2017:

 

    June 30, 2018     December 31, 2017  
    (unaudited)        
             
Indemnification asset   $ 875     $ 875  
Prepaid assets     556       266  
Other     43       31  
    $ 1,474     $ 1,172  

Long-Lived Assets, Including Finite-lived Intangible Assets

Long-Lived Assets, including Finite-Lived Intangible Assets

 

Finite-lived intangible assets are stated at cost less accumulated amortization. Amortization of finite-lived acquired intangible assets is recognized on a straight-line basis, using the estimated useful lives of the assets of approximately two years to nine years in acquisition related amortization expense in the condensed consolidated statements of operations.

 

The Company reviews the recoverability of long-lived assets and finite-lived intangible assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. If the sum of the expected future undiscounted cash flows is less than the carrying amount of the asset, an impairment loss is recognized by reducing the recorded value of the asset to its fair value measured by future discounted cash flows. This analysis requires estimates of the amount and timing of projected cash flows and, where applicable, judgments associated with, among other factors, the appropriate discount rate. Such estimates are critical in determining whether any impairment charge should be recorded and the amount of such charge if an impairment loss is deemed to be necessary. 

Discontinued Operations

Discontinued Operations

 

The Company accounts for business dispositions and its businesses held for sale in accordance with ASC 205-20, Discontinued Operations (“ASC 205-20”). ASC 205-20 requires the results of operations of business dispositions to be segregated from continuing operations and reflected as discontinued operations in current and prior periods. See Note 11, Discontinued Operations for further information. 

Basic and Diluted Net Loss Per Share

Basic and Diluted Net Loss per Share

 

A reconciliation of the number of shares of common stock used in the calculation of basic and diluted loss per share for the three- and six-month periods ended June 30, 2018 and 2017 is as follows:

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2018     2017     2018     2017  
    (unaudited)  
                         
Basic weighted average number of common shares     27,933       9,657       27,894       6,877  
Potential dilutive effect of stock-based awards     -       -       -       -  
Diluted weighted average number of common shares     27,933       9,657       27,894       6,877  

 

The following outstanding stock-based instruments were excluded from the computation of the effect of dilutive securities on loss per share for the following periods because they would have been anti-dilutive:

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2018     2017     2018     2017  
    (unaudited)  
                         
Options     2,256       323       2,256       323  
Stock-settled stock appreciation rights (SARs)     59       85       59       85  
Restricted stock units (RSUs)     220       68       220       68  
Warrants     13,542       17,105       13,542       17,105  
      16,077       17,581       16,077       17,581  

XML 37 R26.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 2018
Accounting Policies [Abstract]  
Schedule of Effect of Adoption of ASC Topic 606 on Condensed Consolidated Balance Sheet and Statement of Operations

The following tables present the effect of the adoption of ASC Topic 606 on our condensed consolidated balance sheet and revenue as of and for the six months ended June 30, 2018:

 

Consolidated Balance Sheet:

 

 

    June 30, 2018  
          (unaudited)        
    As reported     Balances without Adoption of ASC 606     Effect of Change
Higher/(Lower)
 
Accounts receivable, net   $ 7,647     $ 6,731     $ 916  
Accumulated deficit     (134,410 )     (136,910 )     (2,500 )

 

Revenue:

 

    For the six months ended June 30, 2018  
          (unaudited)        
    As reported     Balances without Adoption of ASC 606     Effect of Change
Higher/(Lower)
 
Revenue, net   $ 10,310     $ 9,580     $ 730  

Schedule of Other Current Assets

Other current assets consisted of the following as of June 30, 2018 and December 31, 2017:

 

    June 30, 2018     December 31, 2017  
    (unaudited)        
             
Indemnification asset   $ 875     $ 875  
Prepaid assets     556       266  
Other     43       31  
    $ 1,474     $ 1,172  

Schedule of Weighted Average Number of Shares

A reconciliation of the number of shares of common stock used in the calculation of basic and diluted loss per share for the three- and six-month periods ended June 30, 2018 and 2017 is as follows:

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2018     2017     2018     2017  
    (unaudited)  
                         
Basic weighted average number of common shares     27,933       9,657       27,894       6,877  
Potential dilutive effect of stock-based awards     -       -       -       -  
Diluted weighted average number of common shares     27,933       9,657       27,894       6,877  

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The following outstanding stock-based instruments were excluded from the computation of the effect of dilutive securities on loss per share for the following periods because they would have been anti-dilutive:

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2018     2017     2018     2017  
    (unaudited)  
                         
Options     2,256       323       2,256       323  
Stock-settled stock appreciation rights (SARs)     59       85       59       85  
Restricted stock units (RSUs)     220       68       220       68  
Warrants     13,542       17,105       13,542       17,105  
      16,077       17,581       16,077       17,581  

XML 38 R27.htm IDEA: XBRL DOCUMENT v3.10.0.1
Other Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of Identifiable Intangible Assets Carrying Value

The net carrying value of the identifiable intangible assets as of June 30, 2018 and December 31, 2017 are as follows:

 

          As of June 30, 2018     As of December 31, 2017  
          (unaudited)        
    Life     Carrying     Carrying  
    (Years)     Amount     Amount  
Diagnostic assets:                        
Asuragen acquisition:                        
Thyroid     9     $ 8,519     $ 8,519  
RedPath acquisition:                        
Pancreas test     7       16,141       16,141  
Barrett’s test     9       18,351       18,351  
Total           $ 43,011     $ 43,011  
Diagnostic lab:                        
CLIA Lab     2.3     $ 609     $ 609  
                         
Accumulated Amortization           $ (12,140 )   $ (10,515 )
                         
Net Carrying Value           $ 31,480     $ 33,105  

Schedule of Future Estimated Amortization Expense

Amortization of our diagnostic assets begins upon launch of the product. Estimated amortization expense for the next five years is as follows, based on current assumptions of future product launches:

 

2018     2019     2020     2021     2022  
$ 3,252     $ 5,292     $ 5,292     $ 4,908     $ 2,987  

XML 39 R28.htm IDEA: XBRL DOCUMENT v3.10.0.1
Fair Value Measurements (Tables)
6 Months Ended
Jun. 30, 2018
Fair Value Disclosures [Abstract]  
Schedule of Financial Instrument Measured on Recurring Basis

The valuation methodologies used for the Company’s financial instruments measured on a recurring basis at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, are set forth in the tables below:

 

    As of June 30, 2018     Fair Value Measurements  
    Carrying     Fair     As of June 30, 2018  
    Amount     Value     Level 1     Level 2     Level 3  
    (unaudited)  
Liabilities:                                        
Contingent consideration:                                        
Asuragen (1)   $ 1,427     $ 1,427     $ -     $ -     $ 1,427  
Other long-term liabilities:                                        
Warrant liability (2)     407       407       -       -       407  
    $ 1,834     $ 1,834     $ -     $ -     $ 1,834  

 

    As of December 31, 2017     Fair Value Measurements  
    Carrying     Fair     As of December 31, 2017  
    Amount     Value     Level 1     Level 2     Level 3  
Liabilities:                                        
Contingent consideration:                                        
Asuragen (1)   $ 1,581     $ 1,581     $ -     $ -     $ 1,581  
Other long-term liabilities:                                        
Warrant liability (2)     473       473       -       -       473  
    $ 2,054     $ 2,054     $ -     $ -     $ 2,054  

 

(1)(2) See Note 7, Accrued Expenses and Long-Term Liabilities

Schedule of Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

A roll forward of the carrying value of the Contingent consideration liability and the Underwriters’ Warrant to June 30, 2018 is as follows:

 

                      Cancellation     Mark to        
    December 31,                 of Obligation/     Market     June 30,  
    2017     Payments     Accretion     Conversions     Adjustment     2018  
    (unaudited)  
                                     
Asuragen   $ 1,581     $ (155 )   $ 1     $ -     $ -     $ 1,427  
                                                 
Underwriters Warrant     473       -               -       (66 )     407  
    $ 2,054     $ (155 )   $ 1     $ -     $ (66 )   $ 1,834  

XML 40 R29.htm IDEA: XBRL DOCUMENT v3.10.0.1
Accrued Expenses and Long-Term Liabilities (Tables)
6 Months Ended
Jun. 30, 2018
Payables and Accruals [Abstract]  
Schedule of Other Accrued Expenses

Other accrued expenses consisted of the following as of June 30, 2018 and December 31, 2017:

 

    June 30, 2018     December 31, 2017  
      (unaudited)          
                 
Accrued royalties   $ 573     $ 296  
Indemnification liability     875       875  
Contingent consideration     316       232  
DOJ settlement     150       500  
Accrued professional fees     690       700  
Taxes payable     471       515  
Unclaimed property     565       565  
All others     664       1,321  
    $ 4,304     $ 5,004  

Schedule of Long Term Liabilities

Long-term liabilities consisted of the following as of June 30, 2018 and December 31, 2017:

 

    June 30, 2018     December 31, 2017  
    (unaudited)        
             
Warrant liability   $ 407     $ 473  
Uncertain tax positions     3,838       3,734  
Other     94       82  
    $ 4,339     $ 4,289  

XML 41 R30.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock-Based Compensation (Tables)
6 Months Ended
Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions

The following table provides the weighted average assumptions used in determining the fair value of the stock option awards granted during the six-month periods ended June 30, 2018 and 2017.

 

    Six Months Ended  
    June 30, 2018     June 30, 2017  
    (unaudited)  
             
Risk-free interest rate     2.65 %     1.96 %
Expected life     6.00       4.91  
Expected volatility     126.93 %     138.71 %
Dividend yield     -       -  

 

XML 42 R31.htm IDEA: XBRL DOCUMENT v3.10.0.1
Income Taxes (Tables)
6 Months Ended
Jun. 30, 2018
Income Tax Disclosure [Abstract]  
Schedule of Effective Income Tax Rate Reconciliation

The following table summarizes income tax expense on (loss) income from continuing operations and the effective tax rate for the three- and six-month periods ended June 30, 2018 and 2017:

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2018     2017     2018     2017  
    (unaudited)     (unaudited)  
                         
Provision (benefit) from income tax   $ 8     $ (301 )   $ 14     $ (298 )
Effective income tax rate     (0.4 )%     4.6 %     (0.3 )%     6.4 %

XML 43 R32.htm IDEA: XBRL DOCUMENT v3.10.0.1
Discontinued Operations (Tables)
6 Months Ended
Jun. 30, 2018
Discontinued Operations and Disposal Groups [Abstract]  
Schedule of Discontinued Operations Amount Recognized in Balance Sheet

The components of liabilities classified as discontinued operations relate to Commercial Services and consist of the following as of June 30, 2018 and December 31, 2017:

 

    June 30, 2018     December 31, 2017  
    (unaudited)        
             
Accounts payable   $ 192     $ 192  
Other     747       1,110  
Current liabilities from discontinued operations     939       1,302  
Total liabilities   $ 939     $ 1,302  

XML 44 R33.htm IDEA: XBRL DOCUMENT v3.10.0.1
Supplemental Cash Flow Information (Tables)
6 Months Ended
Jun. 30, 2018
Supplemental Cash Flow Elements [Abstract]  
Schedule of Supplemental Disclosure of Cash flow Information

  13. SUPPLEMENTAL CASH FLOW INFORMATION

 

The following table presents cash flows used in the Company’s discontinued operations for the six months ended June 30, 2018 and 2017:

 

    Six Months Ended  
    June 30,  
    2018     2017  
    (unaudited)  
Net cash used in operating activities of discontinued operations   $ (354 )   $ (883 )
                 

 

Supplemental Cash Flow Information

(in thousands)

 

    Six Months Ended  
    June 30,  
    2018     2017  
    (unaudited)  
Operating                
Adoption of ASC 606   $ 2,500     $ -  
Prepaid stock grants issued to vendors   $ 286     $ -  
                 
Investing                
Acquisition of property and equipment in other accrued expenses   $ 46     $ -  
                 
Financing                
Settlement of the RedPath Note   $ -     $ (8,098 )
Issuance of the Exchange Notes   $ -     $ 11,375  
Non-cash equity conversion costs   $ -     $ (173 )
Debt issuance costs   $ -     $ (511 )
Warrants issued through Termination Agreement*   $ -     $ 193  
Common shares issued in debt exchange   $ -     $ 8,869  

 

*See Note 14, Equity

XML 45 R34.htm IDEA: XBRL DOCUMENT v3.10.0.1
Warrants (Tables)
6 Months Ended
Jun. 30, 2018
Warrants  
Schedule of Warrants Outstanding and Warrants Activity

Warrants outstanding for the period ended June 30, 2018 are as follows:

 

Description   Classification   Exercise Price     Expiration Date   Warrants Issued     Warrants Exercised     Warrants Cancelled/ Expired    

Balance

December 31, 2017

   

Balance

June 30,

2018

 
                                             
Private Placement Warrants, issued January 25, 2017   Equity   $ 4.69     June 2022     855,000       -       -       855,000       855,000  
RedPath Warrants, issued March 22, 2017   Equity   $ 4.69     September 2022     100,000       -       -       100,000       100,000  
Pre-Funded Warrants, issued June 21, 2017   Liability   $ 0.01     None     2,600,000       (2,600,000 )     -       -       -  
Underwriters Warrants, issued June 21, 2017   Liability   $ 1.32     December 2022     575,000       -       (40,000 )     535,000       535,000  
Base & Overallotment Warrants, issued June 21, 2017   Equity   $ 1.25     June 2022     14,375,000       (5,672,852 )     -       8,702,148       8,702,148  
Vendor Warrants, issued August 6, 2017   Equity   $ 1.25     August 2020     150,000       -       -       150,000       150,000  
Warrants issued October 12, 2017   Equity   $ 1.80     April 2022     3,200,000       -       -       3,200,000       3,200,000  
                                                         
                      21,855,000       (8,272,852 )     (40,000 )     13,542,148       13,542,148  

XML 46 R35.htm IDEA: XBRL DOCUMENT v3.10.0.1
Liquidity (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]            
Cash and cash equivalents $ 10,084 $ 14,265 $ 10,084 $ 14,265 $ 15,199 $ 602
Accounts receivable, net 7,647   7,647   3,437  
Total current assets 19,205   19,205   19,808  
Total current liabilities 7,354   7,354   $ 8,091  
Net loss $ 1,917 $ 6,306 5,110 3,892    
Net cash used in operating activities     $ 5,027 $ 8,572    
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies (Details Narrative)
$ in Thousands
6 Months Ended
Jun. 30, 2018
USD ($)
Integer
Jun. 30, 2017
USD ($)
Accounts receivable related to the adjustment $ 1,710 $ 512
Number of operating segment | Integer 1  
Minimum [Member]    
Finite-lived intangible asset, useful life 2 years  
Maximum [Member]    
Finite-lived intangible asset, useful life 9 years  
Adoption of ASC Topic 606 [Member]    
Cumulative adjustment to opening accumulated deficit and increase of accounts receivable $ 2,500  
Accounts receivable related to the adjustment $ 900  
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies - Schedule of Effect of Adoption of ASC Topic 606 on Condensed Consolidated Balance Sheet and Statement of Operations (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2018
Dec. 31, 2017
Accounts receivable, net $ 7,647 $ 3,437
Accumulated deficit (134,410) $ (131,800)
Revenue, net 10,310  
Balances without Adoption of ASC 606 [Member]    
Accounts receivable, net 6,731  
Accumulated deficit (136,910)  
Revenue, net 9,580  
Effect of Change Higher/(Lower) [Member]    
Accounts receivable, net 916  
Accumulated deficit (2,500)  
Revenue, net $ 730  
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies - Schedule of Other Current Assets (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Accounting Policies [Abstract]    
Indemnification assets $ 875 $ 875
Prepaid assets 556 266
Other 43 31
Other current assets $ 1,474 $ 1,172
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies - Schedule of Weighted Average Number of Shares (Details) - shares
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Accounting Policies [Abstract]        
Basic weighted average number of common shares 27,933,000 9,657,000 27,894,000 6,877,000
Potential dilutive effect of stock-based awards
Diluted weighted average number of common shares 27,933,000 9,657,000 27,894,000 6,877,000
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.10.0.1
Summary of Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share 16,077,000 17,581,000 16,077,000 17,851,000
Options [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share 2,256,000 323,000 2,256,000 323,000
Stock-Settled Stock Appreciation Rights (SARs) [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share 59,000 85,000 59,000 85,000
Restricted Stock Units (RSUs) [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share 220,000 68,000 220,000 68,000
Warrants [Member]        
Antidilutive Securities Excluded from Computation of Earnings Per Share 13,542,000 17,105,000 13,542,000 17,105,000
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.10.0.1
Other Intangible Assets (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]        
Amortization expense $ 813 $ 813 $ 1,626 $ 1,626
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.10.0.1
Other Intangible Assets - Schedule of Identifiable Intangible Assets Carrying Value (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2018
Dec. 31, 2017
Dec. 31, 2016
Finite-lived Intangible Assets, Accumulated Amortization $ (12,140) $ (10,515)  
Finite-lived Intangible Assets, Net Carrying Value $ 31,480 33,105  
Diagnostic Assets, Thyroid [Member] | Asuragen Acquisition [Member]      
Finite-lived Intangible Asset, Useful Life (Years) 9 years    
Finite-lived Intangible Assets, Gross $ 8,519 8,519  
Diagnostic Assets, Pancreas Test [Member] | RedPath Acquisition [Member]      
Finite-lived Intangible Asset, Useful Life (Years) 7 years    
Finite-lived Intangible Assets, Gross $ 16,141 16,141  
Diagnostic Assets, Barrett's Test [Member] | RedPath Acquisition [Member]      
Finite-lived Intangible Asset, Useful Life (Years) 9 years    
Finite-lived Intangible Assets, Gross $ 18,351   $ 18,351
Diagnostic Lab, CLIA Lab [Member]      
Finite-lived Intangible Asset, Useful Life (Years) 2 years 3 months 19 days    
Finite-lived Intangible Assets, Gross $ 609 609  
Diagnostic Assets [Member]      
Finite-lived Intangible Assets, Gross $ 43,011 $ 43,011  
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.10.0.1
Other Intangible Assets - Schedule of Future Estimated Amortization Expense (Details)
$ in Thousands
Jun. 30, 2018
USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]  
2018 $ 3,252
2019 5,292
2020 5,292
2021 4,908
2022 $ 2,987
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.10.0.1
Fair Value Measurements (Details Narrative)
Jun. 21, 2017
shares
Pre-Funded Warrants [Member]  
Warrant to purchase shares of common stock 2,600,000
Underwriter Warrants[Member]  
Warrant to purchase shares of common stock 575,000
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.10.0.1
Fair Value Measurements - Schedule of Financial Instrument Measured on Recurring Basis (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Reported Value Measurement [Member]    
Warrant liability [1] $ 407 $ 473
Fair value of liabilities 1,834 2,054
Fair Value Measurements [Member]    
Warrant liability [1] 407 473
Fair value of liabilities 1,834 2,054
Level 1 [Member]    
Warrant liability [1]
Fair value of liabilities
Level 2 [Member]    
Warrant liability [1]
Fair value of liabilities
Level 3 [Member]    
Warrant liability [1] 407 473
Fair value of liabilities 1,834 2,054
Asuragen [Member]    
Contingent consideration [1] 1,427 1,581
Asuragen [Member] | Fair Value Measurements [Member]    
Contingent consideration [1] 1,427 1,581
Asuragen [Member] | Level 1 [Member]    
Contingent consideration [1]
Asuragen [Member] | Level 2 [Member]    
Contingent consideration [1]
Asuragen [Member] | Level 3 [Member]    
Contingent consideration [1] $ 1,427 $ 1,581
[1] See Note 7, Accrued Expenses and Long-Term Liabilities
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.10.0.1
Fair Value Measurements - Schedule of Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation (Details)
$ in Thousands
6 Months Ended
Jun. 30, 2018
USD ($)
Beginning Balance $ 2,054
Payments (155)
Accretion 1
Cancellation of Obligation/Conversions
Mark to Market Adjustment (66)
Ending Balance 1,834
Underwriter Warrants [Member]  
Beginning Balance 473
Payments
Accretion
Cancellation of Obligation/Conversions
Mark to Market Adjustment (66)
Ending Balance 407
Asuragen [Member]  
Beginning Balance 1,581
Payments (155)
Accretion 1
Cancellation of Obligation/Conversions
Mark to Market Adjustment
Ending Balance $ 1,427
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.10.0.1
Commitments and Contingencies (Details Narrative)
6 Months Ended 12 Months Ended 36 Months Ended
Mar. 15, 2018
USD ($)
ft²
Mar. 09, 2017
USD ($)
Jun. 30, 2018
USD ($)
Jun. 30, 2017
USD ($)
Dec. 31, 2017
USD ($)
Dec. 31, 2017
USD ($)
Promissory note     $ 11,375,000    
Pittsburgh Lease [Member]            
Operating lease expire date description Extend it through June 30, 2023          
Number of square foot for laboratory and office space | ft² 20,000          
Operating lease, description The lease is for 20,000 square feet of laboratory and office space, with monthly base rent of $33,333 beginning July 1, 2018, escalating by twenty-five percent (25%) on July 1, 2019 to $41,667 per month. The Company may, at its option, extend the term of the Lease for two consecutive terms of five years each, with the monthly based rent escalating by ten percent (10%) for each of the additional five year terms.          
Pittsburgh Lease [Member] | July 1, 2018 [Member]            
Monthly base rent $ 33,333          
Pittsburgh Lease [Member] | July 1, 2019 [Member]            
Monthly base rent $ 41,667          
Companys Counter-Claim Against Prolias [Member]            
Litigation settlement, amount   $ 500,000        
Loss contingency, damages sought, value   636,053        
Promissory note   $ 1,000,000        
Settlement Agreement [Member] | RedPath [Member]            
Payments for legal settlements     $ 150,000   $ 500,000  
Loss contingency accrual, payments         $ 500,000  
Settlement Agreement [Member] | RedPath [Member] | Maximum [Member]            
Litigation settlement, amount           $ 3,000,000
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.10.0.1
Accrued Expenses and Long-Term Liabilities - Schedule of Other Accrued Expenses (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Payables and Accruals [Abstract]    
Accrued royalties $ 573 $ 296
Indemnification liability 875 875
Contingent consideration 316 232
DOJ settlement 150 500
Accrued professional fees 690 700
Taxes payable 471 515
Unclaimed property 565 565
All others 664 1,321
Total other accrued expenses $ 4,304 $ 5,004
XML 60 R49.htm IDEA: XBRL DOCUMENT v3.10.0.1
Accrued Expenses and Long-Term Liabilities - Schedule of Long Term Liabilities (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Payables and Accruals [Abstract]    
Warrant liability $ 407 $ 473
Uncertain tax positions 3,838 3,734
Other 94 82
Long-term liabilities $ 4,339 $ 4,289
XML 61 R50.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock-Based Compensation (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Mar. 31, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Share-based compensation expense $ 400   $ 100 $ 1,016 $ 206
Stock Incentive Plan [Member]          
Share-based compensation arrangement by share-based payment award, description       Stock options have been granted with an exercise price equal to the market value of the common stock on the date of grant, expire 10 years from the date they are granted, and generally vested over a one to three-year period for employees and members of the Board of Directors. Upon exercise, new shares will be issued by the Company. The Company granted stock options in 2018 and 2017 which vest monthly over a one-year period. SARs are generally granted with a grant price equal to the market value of the common stock on the date of grant, vest one-third each year on the anniversary of the date of grant and expire five years from the date of grant. The restricted shares and restricted stock units granted to employees generally have a three-year graded vesting period and are subject to accelerated vesting and forfeiture under certain circumstances.  
Share-based compensation arrangement, options, grants in period, gross   745,600      
Share-based compensation arrangements, options, grants in period, weighted average exercise price   $ 1.01      
Stock Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member]          
Share-based compensation arrangement, options, grants in period, gross   186,400      
Share-based compensation arrangement, award vesting period   3 years      
XML 62 R51.htm IDEA: XBRL DOCUMENT v3.10.0.1
Stock-Based Compensation - Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions (Details)
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]    
Risk-free interest rate 2.65% 1.96%
Expected life 6 years 4 years 10 months 28 days
Expected volatility 126.93% 138.71%
Dividend yield 0.00% 0.00%
XML 63 R52.htm IDEA: XBRL DOCUMENT v3.10.0.1
Income Taxes - Schedule of Effective Income Tax Rate Reconciliation (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Income Tax Disclosure [Abstract]        
Provision (benefit) from income tax $ 8 $ (301) $ 14 $ (298)
Effective income tax rate (0.40%) 4.60% (0.30%) 6.40%
XML 64 R53.htm IDEA: XBRL DOCUMENT v3.10.0.1
Segment Information (Details Narrative)
Dec. 22, 2015
Integer
Segment Reporting [Abstract]  
Number of reportable segments 1
XML 65 R54.htm IDEA: XBRL DOCUMENT v3.10.0.1
Discontinued Operations - Schedule of Discontinued Operations Amount Recognized in Balance Sheet (Details) - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Discontinued Operations and Disposal Groups [Abstract]    
Accounts payable $ 192 $ 192
Other 747 1,110
Current liabilities from discontinued operations 939 1,302
Total liabilities $ 939 $ 1,302
XML 66 R55.htm IDEA: XBRL DOCUMENT v3.10.0.1
Long-Term Debt (Details Narrative) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended 12 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Extinguishment fair value loss $ (2,731) $ (4,278)  
Exchange Agreement [Member] | Senior Convertible Notes [Member] | March 23, 2017 and April 18, 2017 [Member]          
Debt conversion, converted instrument, shares issued     3,795,429    
Extinguishment fair value loss         $ 4,300
XML 67 R56.htm IDEA: XBRL DOCUMENT v3.10.0.1
Supplemental Cash Flow Information - Schedule of Supplemental Disclosure of Cash flow Information (Details) - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Supplemental Cash Flow Elements [Abstract]    
Net cash used in operating activities of discontinued operations $ (354) $ (883)
Adoption of ASC 606 2,500
Prepaid stock grants issued to vendors 286  
Acquisition of property and equipment in other accrued expenses 46
Settlement of the RedPath Note (8,098)
Issuance of the Exchange Notes 11,375
Non-cash equity conversion costs (173)
Debt issuance costs (511)
Warrants issued through Termination Agreement [1] 193
Common shares issued in debt exchange $ 8,869
[1] See Note 14, Equity
XML 68 R57.htm IDEA: XBRL DOCUMENT v3.10.0.1
Equity (Details Narrative) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 6 Months Ended
Mar. 31, 2017
Jun. 30, 2017
Jun. 30, 2018
Number of common stock issued, shares 2,793,000 9,900,000  
Warrants to purchase shares of common stock 855,000    
Gross proceeds from equity offerings $ 12,200    
Warrants exercise price description   Each Firm Share and accompanying Base Warrant was sold for a combined effective price of $1.10, and each Pre-Funded Warrant and accompanying Base Warrant was sold for a combined effective price of $1.09.  
Gross proceeds from warrants   $ 13,700  
Net proceeds from warrants   $ 12,300  
Base Warrants [Member]      
Warrants to purchase shares of common stock   12,500,000  
Warrant exercise price   $ 1.25  
Pre-Funded Warrants [Member]      
Warrants to purchase shares of common stock   2,600,000  
Warrant exercise price   $ 0.01 $ 0.01
Termination Agreement [Member] | RedPath Equityholder Representative, LLC [Member]      
Warrants to purchase shares of common stock 100,000    
Warrant term 5 years    
Common stock price, per share $ 4.69    
RedPath Debt Exchange and conversion of Senior Convertible Notes [Member]      
Number of common stock issued, shares 3,795,429    
XML 69 R58.htm IDEA: XBRL DOCUMENT v3.10.0.1
Warrants - Schedule of Warrants Outstanding and Warrants Activity (Details) - $ / shares
6 Months Ended
Jun. 30, 2018
Dec. 31, 2017
Jun. 30, 2017
Warrants Issued 21,855,000    
Warrants Exercised (8,272,852)    
Warrants Cancelled/Expired (40,000)    
Warrants 13,542,148 13,542,148  
Private Placement Warrants[Member]      
Description Private Placement Warrants, issued January 25, 2017    
Classification Equity    
Exercise Price $ 4.69    
Expiration Date June 2022    
Warrants Issued 855,000    
Warrants Exercised    
Warrants Cancelled/Expired    
Warrants 855,000 855,000  
RedPath Warrants[Member]      
Description RedPath Warrants, issued March 22, 2017    
Classification Equity    
Exercise Price $ 4.69    
Expiration Date September 2022    
Warrants Issued 100,000    
Warrants Exercised    
Warrants Cancelled/Expired    
Warrants 100,000 100,000  
Pre-Funded Warrants [Member]      
Description Pre-Funded Warrants, issued June 21, 2017    
Classification Liability    
Exercise Price $ 0.01   $ 0.01
Expiration Date None    
Warrants Issued 2,600,000    
Warrants Exercised (2,600,000)    
Warrants Cancelled/Expired    
Warrants  
Underwriter Warrants [Member]      
Description Underwriters Warrants, issued June 21, 2017    
Classification Liability    
Exercise Price $ 1.32    
Expiration Date December 2022    
Warrants Issued 575,000    
Warrants Exercised    
Warrants Cancelled/Expired (40,000)    
Warrants 535,000 535,000  
Base & Overallotment Warrants [Member]      
Description Base & Overallotment Warrants, issued June 21, 2017    
Classification Equity    
Exercise Price $ 1.25    
Expiration Date June 2022    
Warrants Issued 14,375,000    
Warrants Exercised (5,672,852)    
Warrants Cancelled/Expired    
Warrants 8,702,148 8,702,148  
Vendor Warrants [Member]      
Description Vendor Warrants, issued August 6, 2017    
Classification Equity    
Exercise Price $ 1.25    
Expiration Date August 2020    
Warrants Issued 150,000    
Warrants Exercised    
Warrants Cancelled/Expired    
Warrants 150,000 150,000  
Warrants Issued [Member]      
Description Warrants issued october 12 2017    
Classification Equity    
Exercise Price $ 1.80    
Expiration Date April 2022    
Warrants Issued 3,200,000    
Warrants Exercised    
Warrants Cancelled/Expired    
Warrants 3,200,000 3,200,000  
XML 70 R59.htm IDEA: XBRL DOCUMENT v3.10.0.1
Subsequent Events (Details Narrative) - Subsequent Event [Member]
$ in Thousands
1 Months Ended
Jul. 31, 2018
USD ($)
Line of credit, term 3 years
Line of credit $ 4,000
Line of credit net available receivables 80.00%
Expansion capital $ 850
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