Note 2 - Liquidity and Management’s Plans

The accompanying financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Since inception, the Company has incurred, and continues to incur, significant losses from operations.

The Company has funded its operations primarily through external investor financing arrangements. The Company raised significant funds in 2013, 2014 and 2015, including:

$4.0 million in two Series A Preferred Stock offerings during 2014 and 2013,

$1.5 million through the issuance of convertible notes in 2014,

$2.3 million in short-term demand notes in 2015 and 2014 (in the first quarter of 2015, $0.3 million of demand notes, held by an entity controlled by our chief executive officer, were settled as partial payment for a 2015 convertible note), and

$1.5 million through the issuance of convertible notes in 2015.

Subsequent to the first quarter, in April 2015, the Company raised $0.1 million through the issuance of additional demand notes with terms similar to the 2014 demand notes (Note 6) and $0.2 million through the issuance of an unsecured promissory note. In May 2015, the Company completed its initial public offering, or IPO, pursuant to which the Company offered and sold 2,850,000 units, each consisting of one share of common stock and a detachable stock purchase warrant to purchase an additional share of common stock, at an initial offering price of $6.00 per unit (Note 11). Of the total gross proceeds of $17.1 million, approximately $2.1 million was satisfied by exchanging outstanding demand notes. After considering the demand notes, underwriting discounts and commissions and offering expenses, the total net cash proceeds to the Company was $12.8 million. In connection with the IPO, all of the Company’s outstanding Series A Preferred Stock, 2014 convertible notes and 2015 convertible notes were converted into 7,374,864 shares of common stock.

The principal purposes of the IPO were to obtain additional capital to support operations, establish a public market for the Company’s common stock and to facilitate its future access to the public capital markets. The Company currently intends to use the net proceeds as follows:

approximately $5.0 million for sales and marketing activities, including expansion of the Company’s sales force to support the ongoing commercialization of the Acuitas MDRO gene test products and, when development is completed, the Acuitas Lighthouse MDRO Management System, and for working capital and general and administrative purposes;

approximately $4.0 million for research and development related to the continued support of the completion of the development of the Acuitas Lighthouse MDRO Management System and future products in its pipeline; and

the remainder for general and administrative expenses and for working capital and other general corporate purposes.

The Company’s current operating assumptions (following the IPO), which include management’s best estimate of future revenue and operating expenses, indicate that current cash on hand will be sufficient to fund operations through at least the end of 2015. In the event the Company is unable to successfully raise additional capital in 2016, the Company will not have sufficient cash flows and liquidity to finance its business operations as currently contemplated. Accordingly, in such circumstances the Company would be compelled to reduce general and administrative expenses and delay research and development projects, including the purchase of scientific equipment and supplies, until it is able to obtain sufficient financing. The financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.