Notes to Unaudited Consolidated Financial Statements
Note 1. Organization, Description of Business, Basis of Presentation, 2019 Offerings, Forbearance Agreements, Standstill Agreements, Recently Adopted Accounting Standard, and Recent Accounting Pronouncements
We are an emerging leader in enabling precision medicine in oncology by providing multi-disciplinary diagnostic and data solutions, facilitating individualized therapies through our diagnostic tests, services and molecular markers. We develop, commercialize and provide molecular- and biomarker-based tests and services, including proprietary preclinical oncology and immuno-oncology services, that enable biotech and pharmaceutical companies engaged in oncology and immuno-oncology trials to better select candidate populations and reduce adverse drug reactions by providing information regarding genomic and molecular factors influencing subject responses to therapeutics. Through our clinical services, we enable physicians to personalize the clinical management of each individual patient by providing genomic information to better diagnose, monitor and inform cancer treatment. We have a comprehensive, disease-focused oncology testing portfolio, and extensive set of anti-tumor referenced data based on predictive xenograft and syngeneic tumor models. Our tests and techniques target a wide range of indications, covering all ten of the top cancers in prevalence in the United States, with additional unique capabilities offered by our FDA-cleared Tissue of Origin® test for identifying difficult to diagnose tumor types or poorly differentiated metastatic disease. Following the acquisition of vivoPharm, Pty Ltd. (“vivoPharm”) we provide contract research services, focused primarily on unique specialized studies to guide drug discovery and development programs in the oncology and immuno-oncology fields.
We were incorporated in the State of Delaware on April 8, 1999 and currently have offices and state-of-the-art laboratories located in New Jersey, North Carolina, Pennsylvania, and Australia. Our laboratories comply with the highest regulatory standards as appropriate for the services they deliver including CLIA, CAP, and NY State. Our services are built on a foundation of world-class scientific knowledge and intellectual property in solid and blood-borne cancers, as well as strong academic relationships with major cancer centers such as Memorial Sloan-Kettering, Mayo Clinic, and the National Cancer Institute. We offer preclinical services such as predictive tumor models, human orthotopic xenografts and syngeneic immuno-oncology relevant tumor models in our Hershey PA facility, and a leader in the field of immuno-oncology preclinical services in the United States. This service is supplemented with GLP toxicology and extended bioanalytical services in our Australian based facility in Bundoora VIC.
Basis of Presentation
The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions for interim reporting as prescribed by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the audited consolidated financial statements as of and for the year ended
December 31, 2018
, filed with the Securities and Exchange Commission on April 16, 2019. The consolidated balance sheet as of
December 31, 2018
, included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP. Interim financial results are not necessarily indicative of the results that may be expected for any future interim period or for the year ending
December 31, 2019
.
Derivative Liabilities
The Company evaluates its debt and equity issuances to determine if those contracts or embedded components of those contracts qualify as derivatives requiring separate recognition in the Company’s financial statements. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability and the change in fair value is recorded in other income (expense) in the consolidated results of operations. In circumstances where there are multiple embedded instruments that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within
twelve months
of the balance sheet date.
When the Company has determined that the embedded conversion options should not be bifurcated from their host instruments, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption and are classified in interest expense in the consolidated results of operations.
2019 Offerings
On January 9, 2019, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC (“H.C. Wainwright”), relating to an underwritten public offering of
13,333,334
shares of our common stock for
$0.225
per share. We received proceeds from the offering of approximately
$2,437,000
, net of expenses and discounts of approximately
$563,000
. We also issued warrants to purchase
933,334
shares of common stock to H.C. Wainwright in connection with this offering. The warrants are exercisable for
five years
from the date of issuance at a per share price of
$0.2475
.
On January 26, 2019, we issued
15,217,392
shares of common stock at a public offering price of
$0.23
per share. We received proceeds from the offering of approximately
$2,975,000
, net of expenses and discounts of approximately
$525,000
. We also issued warrants to purchase
1,065,217
shares of common stock to the underwriter, H.C. Wainwright, in connection with this offering. The warrants are exercisable for
five years
from the date of issuance at a per share price of
$0.253
.
The January 9, 2019 and January 26, 2019 offerings will be referred to collectively as the “2019 Offerings.” As disclosed in Note 13, certain of our directors and executive officers purchased shares in the 2019 Offerings at the public offering price.
Forbearance Agreements
On January 16, 2019, we entered into forbearance agreements with both Partners for Growth IV, L.P. (“PFG”) and Silicon Valley Bank (“SVB”) that among other things, (i) required us to comply with certain milestones in connection with a potential strategic transaction satisfactory to PFG and SVB with an anticipated closing date of on or before April 15, 2019 (the “Milestones”), and (ii) provided for PFG and SVB’s forbearance of their respective rights and remedies resulting from existing and stated potential events of default under the
$6.0 million
term note (“PFG Term Note”) and SVB asset-based line of credit (“ABL”) until the earlier of (a) the occurrence of an additional event of default or (b) February 15, 2019; provided such date was to automatically extend to (1) February 28, 2019 and then to (2) April 15, 2019 so long as we were in compliance with the Milestones required as of such dates. In addition, the ABL interest rate was increased to
2.25%
over the Wall Street Journal prime rate, and the maturity date was extended until April 15, 2019. While the expired forbearance agreements with PFG and SVB acknowledged that we were and anticipated that we would be in violation of certain financial and other covenants of the ABL and the PFG Term Note as of December 31, 2018, January 31, 2019, February 28, 2019 and March 31, 2019, the ABL is currently past its maturity date. We are in discussions with SVB and PFG about possible extensions of the forbearance agreements and of the maturity of the ABL as part of the overall strategic process.
Standstill Agreements
On February 15, 2019, we entered into a standstill agreement with Iliad Research and Trading, L.P. (“Iliad”), related to the
$2,625,000
convertible promissory note dated July 17, 2018 (“Convertible Note”) described further in Note 6. The standstill agreement, among other things, provided that Iliad will not seek to redeem any portion of the Convertible Note until April 15, 2019 (the “Standstill”) and increased the outstanding balance of the Convertible Note by approximately
$202,000
, representing a fee to Iliad for such Standstill. In May 2019, we entered into a second standstill agreement with Iliad (“Second Standstill”). The Second Standstill provides that Iliad will not seek to redeem any portion of the Convertible Note until May 31, 2019. In consideration for the Second Standstill, we agreed to adjust the conversion price on the first
$1,250,000
of our debt to Iliad from
$0.80
to
$0.2273
. The Standstill and Second Standstill are referred to collectively as the Standstill Agreements. In May 2019, Iliad converted
$350,000
of the Convertible Note balance into
1,539,815
shares of our common stock at a conversion price of
$0.2273
per share.
Advance from NovellusDx, Ltd.
On September 18, 2018, we entered into an agreement and plan of merger (“Merger Agreement”) with NovellusDx, Ltd. (“NDX”). In connection with signing the Merger Agreement, NDX loaned us
$1,500,000
(“Advance from NDX”). Interest accrued on the outstanding balance at
10.75%
per annum until we terminated the Merger Agreement on December 15, 2018. As a result of the termination, the Advance from NDX, plus interest thereon, became due and payable on
March 15, 2019
. The Company and NDX are currently negotiating a possible resolution or settlement of the Advance from NDX.
Recently Adopted Accounting Standards
In February 2016, the Financial Accounting Standards Board (“FASB”) issued guidance codified in Accounting Standards Codification (“ASC”) 842,
Leases
, which supersedes the guidance in former ASC 840,
Leases
, to increase transparency and comparability among organizations by requiring recognition of right-of-use assets and lease liabilities on the balance sheet and disclosure of key information about leasing arrangements (with the exception of short-term leases).
In July 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-11 to the existing transition guidance that allows entities to recognize a cumulative-effect adjustment to the opening balance of accumulated deficit in the period of adoption. Effective January 1, 2019, we adopted ASC 842 using this new transition guidance. The comparative information has not been restated and continues to be reported under the accounting standard in effect for those periods.
We have elected to use the package of practical expedients, which allows us to not (1) reassess whether any expired or existing contracts are considered or contain leases; (2) reassess the lease classification for any expired or existing leases; and (3) reassess the initial direct costs for any existing leases. We did not elect the hindsight practical expedient, which permits entities to use hindsight in determining the lease term and assessing impairment.
The most significant impact of adopting ASC 842 is related to the recognition of right-of-use assets and lease liabilities for operating leases. Our accounting for finance leases remains substantially unchanged. The adoption of ASC 842 had no impact on our consolidated statements of operations or total cash flows from operations.
The cumulative effect of the changes made to our consolidated January 1, 2019 balance sheet for the adoption of ASC 842 were as follows (in thousands):
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As of December 31, 2018
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Adjustment for Adoption of ASC 842
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As of January 1, 2019
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ASSETS
|
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|
Operating lease right-of-use assets
|
|
$
|
—
|
|
|
$
|
2,643
|
|
|
$
|
2,643
|
|
Other current assets
|
|
2,148
|
|
|
(78
|
)
|
|
2,070
|
|
|
|
$
|
2,148
|
|
|
$
|
2,565
|
|
|
$
|
4,713
|
|
LIABILITIES
|
|
|
|
|
|
|
Operating lease liabilities
|
|
$
|
—
|
|
|
$
|
1,080
|
|
|
$
|
1,080
|
|
Deferred rent payable and other
|
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305
|
|
|
(305
|
)
|
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—
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|
Operating lease liabilities, non-current
|
|
—
|
|
|
1,790
|
|
|
1,790
|
|
|
|
$
|
305
|
|
|
$
|
2,565
|
|
|
$
|
2,870
|
|
Recent Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-15,
Intangibles - Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
, which clarifies the accounting for implementation costs in cloud computing arrangements. The update will become effective for interim and annual periods beginning after December 15, 2019 and may be adopted either retrospectively or prospectively. Early adoption is permitted. We plan to adopt this standard prospectively. We are currently evaluating the impact that adoption of this ASU will have on our consolidated financial statements and whether or not to early adopt.
In January 2017, the FASB issued ASU 2017-04,
Intangibles - Goodwill and Other (Topic 350):
“
Simplifying the Accounting for Goodwill Impairment
,” which removes the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for annual periods beginning after December 15, 2019, and interim periods within those annual periods. Early adoption is permitted and applied prospectively. We do not expect ASU 2017-04 to have a material impact on our consolidated financial statements.
Note 2. Going Concern
At
March 31, 2019
, our cash position and history of losses required management to assess our ability to continue operating as a going concern, according to FASB ASC 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going
Concern. The Company does not have sufficient cash at
March 31, 2019
to fund normal operations beyond the next
three months
from the date of this report. In addition, while the expired forbearance agreements with PFG and SVB acknowledged that we were and anticipated that we would be in violation of certain financial and other covenants of the ABL and the PFG Term Note as of December 31, 2018, January 31, 2019, February 28, 2019 and March 31, 2019, the ABL is currently past its maturity date. We are in discussions with SVB and PFG about possible extensions of the forbearance agreements and of the maturity of the ABL as part of the overall strategic process. The Company’s ability to continue as a going concern is dependent on the Company’s ability to extend the forbearance agreements and the term of the ABL, raise additional equity or debt capital or spin-off non-core assets to raise additional cash. These factors raise substantial doubt about the Company's ability to continue as a going concern.
Net cash used in operating activities was
$4.5 million
and
$4.5 million
for the
three months ended March 31, 2019
and
2018
, respectively, and the Company had unrestricted cash and cash equivalents of
$0.7 million
at
March 31, 2019
, an increase from
$0.2 million
at December 31,
2018
. The Company has negative working capital at
March 31, 2019
of
$18.0 million
.
The Company currently requires a significant amount of additional capital to fund operations and pay its accounts payable, and its ability to continue as a going concern is dependent upon its ability to raise such additional capital and achieve profitability. Raymond James & Associates, Inc. continues to assist us with evaluating strategic options. Such options could include raising more capital, the sale of the Company or another type of strategic partnership. We have reduced our cost of sales and operating expenses by migrating our California laboratory services to New Jersey and North Carolina during the third quarter of 2018, and we are continuing to pursue strategies to reduce our operating costs. We can provide no assurances that our current actions will be successful or that additional sources of financing with be available to us on favorable terms, if at all. If the Company is not able to raise such additional capital on a timely basis or on favorable terms, the Company may need to scale back or, in extreme cases, discontinue its operations or liquidate its assets.
The consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.
Note 3. Revenue and Accounts Receivable
Revenue by service type for the
three months ended March 31, 2019
and
2018
is comprised of the following (in thousands):
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Three Months Ended March 31,
|
|
2019
|
|
2018
|
Biopharma Services
|
$
|
3,964
|
|
|
$
|
3,658
|
|
Clinical Services
|
1,353
|
|
|
2,342
|
|
Discovery Services
|
1,522
|
|
|
1,667
|
|
|
$
|
6,839
|
|
|
$
|
7,667
|
|
Discovery Services revenue for the
three months ended March 31, 2018
includes approximately
$239,000
of revenue from our India subsidiary that was sold in April 2018.
Accounts receivable by service type at
March 31, 2019
and
December 31, 2018
consists of the following (in thousands):
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March 31,
2019
|
|
December 31,
2018
|
Biopharma Services
|
$
|
3,967
|
|
|
$
|
3,692
|
|
Clinical Services
|
5,906
|
|
|
6,031
|
|
Discovery Services
|
881
|
|
|
777
|
|
Allowance for doubtful accounts
|
(3,462
|
)
|
|
(3,462
|
)
|
|
$
|
7,292
|
|
|
$
|
7,038
|
|
Revenue for Biopharma Services are customized solutions for providing information regarding genomic and molecular factors influencing subject responses to therapeutics. Biopharma Services are billed to pharmaceutical and biotechnology companies. Clinical Services are tests performed to provide information on diagnosis of cancers to guide patient management. Clinical Services tests can be billed to Medicare, another third party insurer or the referring community hospital or other healthcare
facility, or directly to patients. Discovery Services are services that provide the tools and testing methods for companies and researchers seeking to identify new DNA-based biomarkers for disease. The breakdown of our Clinical Services revenue (as a percent of total revenue) is as follows:
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Three Months Ended March 31,
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2019
|
|
2018
|
Medicare
|
|
5%
|
|
9%
|
Other third party payors
|
|
15%
|
|
21%
|
|
|
20%
|
|
30%
|
We have historically derived a significant portion of our revenue from a limited number of test ordering sites. Test ordering sites account for all of our Clinical Services revenue. Our test ordering sites are largely hospitals, cancer centers, reference laboratories, physician offices and biopharmaceutical companies. Oncologists and pathologists at these sites order the tests on behalf of the needs of their oncology patients or as part of a clinical trial sponsored by a biopharmaceutical company in which the patient is being enrolled. We generally do not have formal, long-term written agreements with such test ordering sites, and, as a result, we may lose a significant test ordering site at any time, except with biopharmaceutical companies.
Remaining Performance Obligations
:
Services offered under the Biopharma and Discovery Services frequently take time to complete under their respective contacts. These times vary depending on specific contract arrangements including the length of the study and how samples are delivered to us for processing. In the case of Clinical Services and Discovery Services, the duration of performance obligations is less than
one year
. As of
March 31, 2019
, the Company had approximately
$36.8 million
in remaining performance obligations in the Biopharma Services area. We expect to recognize the remaining performance obligations over the next
two years
.
Note 4. Earnings Per Share
For purposes of this calculation, stock warrants, outstanding stock options, convertible debt and unvested restricted shares are considered common stock equivalents using the treasury stock method, and are the only such equivalents outstanding. For all periods presented, all common stock equivalents outstanding were anti-dilutive.
The following table summarizes equivalent units outstanding that were excluded from the earnings per share calculation because their effects were anti-dilutive (in thousands):
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Three Months Ended March 31,
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2019
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2018
|
Common stock purchase warrants
|
12,053
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|
10,055
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Stock options
|
2,290
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|
2,534
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|
Convertible note
|
3,767
|
|
|
—
|
|
Advance from NovellusDx, Ltd.
|
2,690
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|
|
—
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Restricted shares of common stock
|
28
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|
|
683
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|
|
20,828
|
|
|
13,272
|
|
Note 5. Leasing Arrangements
Operating Leases
We lease our laboratory, research facility and administrative office space under various operating leases. We also lease office and scientific equipment under various finance leases.
We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, and operating lease liabilities, non-current on our consolidated balance sheets. Finance leases are included in fixed assets, net of accumulated depreciation and obligations under finance leases.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Our incremental borrowing rate was determined by adjusting our secured borrowing interest rate for the longer-term nature of our leases. Our variable lease payments primarily consist of maintenance and other operating expenses from our real estate leases. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
We have lease agreements with lease and non-lease components. We have elected to account for these lease and non-lease components as a single lease component. We are also electing not to apply the recognition requirements to short-term leases of
twelve months
or less and instead will recognize lease payments as expense on a straight-line basis over the lease term.
The components of lease expense were as follows for the
three months ended March 31, 2019
(in thousands):
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|
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Operating lease cost
|
|
$
|
276
|
|
Short-term lease cost
|
|
24
|
|
Variable lease cost
|
|
62
|
|
Total lease expense
|
|
$
|
362
|
|
Other supplemental information related to leases was as follows for the
three months ended March 31, 2019
:
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Weighted average remaining lease term (in years)
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Operating leases
|
|
3.18
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Weighted average discount rate
|
|
|
Operating leases
|
|
7.87
|
%
|
We did not enter into any new leases that met scope during the
three months ended March 31, 2019
.
At
March 31, 2019
, future estimated minimum lease payments under non-cancelable operating leases were as follows (in thousands):
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2019 (remaining 9 months)
|
|
$
|
860
|
|
2020
|
|
966
|
|
2021
|
|
598
|
|
2022
|
|
563
|
|
2023
|
|
94
|
|
Total minimum lease payments
|
|
3,081
|
|
Less amount representing interest
|
|
453
|
|
Total
|
|
$
|
2,628
|
|
Note 6. Financing
Term Note and Line of Credit
On March 22, 2017, we entered into a
two
year asset-based revolving line of credit agreement (“ABL”) with SVB. The SVB credit facility provided for an ABL for an amount not to exceed the lesser of (a)
$6.0 million
or (b)
80%
of eligible accounts receivable plus the lesser of
50%
of the net collectible value of third party accounts receivable or three (
3
) times the average monthly collection amount of third party accounts receivable over the previous quarter. The ABL required monthly interest payments at the Wall Street Journal prime rate plus
1.50%
and was scheduled to mature on March 22, 2019. We also pay a fee of
0.25%
per year on the average unused portion of the ABL. In August 2018, the maximum borrowings were reduced from
$6.0 million
to
$3.0 million
. In January 2019, the interest rate was adjusted to the Wall Street Journal prime rate plus
2.25%
(
7.75%
at
March 31, 2019
) and the maturity date was extended through April 15, 2019, subject to the Company satisfying certain milestones of the forbearance agreement discussed in Note 1. At
March 31, 2019
, we have borrowings of approximately
$2.4 million
on the ABL.
We concurrently entered into the PFG Term Note, which is a
three
year
$6.0 million
term loan agreement. The PFG Term Note is an interest only loan with the full principal and any outstanding interest due at maturity on March 22, 2020. Interest is payable monthly at a rate of
11.5%
per annum. We may prepay the PFG Term Note in whole or part at any time without penalty. At
March 31, 2019
, the principal amount of the PFG Term Note was
$6,000,000
.
Both loan agreements require us to comply with certain financial covenants, including minimum adjusted EBITDA, revenue and liquidity covenants, and restrict us from, among other things, paying cash dividends, incurring debt and entering into certain transactions without the prior consent of the lenders. Repayment of amounts borrowed under the loan agreements may be accelerated if an event of default occurs, which includes, among other things, a violation of such financial covenants and negative covenants. While the expired forbearance agreements with PFG and SVB acknowledged that we were and anticipated that we would be in violation of certain financial and other covenants of the ABL and the PFG Term Note as of December 31, 2018, January 31, 2019, February 28, 2019 and March 31, 2019, the ABL is currently past its maturity date. We are in discussions with SVB and PFG about possible extensions of the forbearance agreements and of the maturity of the ABL as part of the overall strategic process. During the
three months ended March 31, 2019
, the Company incurred approximately
$167,000
of lender fees associated with the forbearance agreements that were expensed due to prior and expected future violations of the covenants.
Our obligations to SVB under the ABL facility are secured by a first priority security interest on substantially all of our assets, and our obligations under the PFG Term Note are secured by a second priority security interest subordinated to the SVB lien.
Convertible Note
On July 17, 2018, the Company entered into the Convertible Note, pursuant to which the Company issued a convertible promissory note to an institutional accredited investor in the initial principal amount of
$2,625,000
. The Company received consideration of
$2,500,000
, reflecting an original issue discount of
$100,000
, a beneficial conversion feature discount of approximately
$328,000
and expenses payable by the Company of
$25,000
. The Convertible Note has an
18
month term and carries interest at
10%
per annum. The note is convertible into shares of the Company’s common stock at a conversion price of
$0.80
per share (“Conversion Price”) upon
five
trading days’ notice, subject to certain adjustments (standard dilution) and ownership limitations specified in the Convertible Note. In May 2019, the conversion price was reduced to
$0.2273
for
$1,250,000
of the balance of the Convertible Note; the remainder is still convertible at
$0.80
.
Prior to the Standstill Agreements, the investor could redeem any portion of the Convertible Note upon
five
trading days’ notice, beginning January 17, 2019, subject to a maximum monthly redemption amount of
$650,000
, with the Company having the option to pay such redemptions in cash, the Company’s common stock at the Conversion Price, or by a combination thereof, subject to certain conditions, including that the stock price is
$1.00
per share or higher. After taking into consideration the Standstill Agreements, Iliad cannot request a monthly redemption until June 1, 2019. The Company may prepay the outstanding balance of the Convertible Note, in part or in full, at a
10%
premium to par value if prior to the
one year
anniversary of the date of issuance and at par if prepaid thereafter. At maturity, the Company may pay the outstanding balance in cash, the Company’s common stock at the Conversion Price, or by a combination thereof, subject to certain conditions. The note provides that in the event of default, the lender may, at its option, elect to increase the outstanding balance applying the default effect (defined as outstanding balance at date of default multiplied by
15%
plus outstanding amount) by providing written notice to the Company. In addition, the interest rate increases to
22%
upon default. The default effect and default interest rate provisions qualify as embedded derivatives with an estimated fair value of
$55,000
at
March 31, 2019
.
The Convertible Note is the general unsecured obligation of the Company and is subordinated in right of payment to the ABL and PFG Term Note. The following is a summary of the Convertible Note balance at
March 31, 2019
(in thousands):
|
|
|
|
|
Convertible Note, net of discounts of $46
|
$
|
2,781
|
|
Less unamortized debt issuance costs
|
3
|
|
Convertible Note, net
|
$
|
2,778
|
|
In May 2019, Iliad converted
$350,000
of the Convertible Note balance into
1,539,815
shares of our common stock at
$0.2273
per share.
Advance from NDX
On September 18, 2018, we entered into the Merger Agreement with NDX. In connection with signing the Merger Agreement, NDX loaned us
$1,500,000
. Interest accrued on the outstanding balance at
10.75%
per annum until we terminated the Merger Agreement on December 15, 2018. As a result of the termination, the Advance from NDX, plus interest thereon, became due and payable on
March 15, 2019
. The termination was a specified event of default, so on December 15, 2018, the interest rate was increased to
21%
. The default also gives NDX the right to convert all, but not less than all, of the outstanding balance into shares of the Company’s common stock at a conversion price of
$0.606
per share. At
March 31, 2019
, the principal balance of the Advance from NDX was
$1,500,000
.
The Advance from NDX is the general unsecured obligation of the Company and is subordinated in right of payment to the ABL and PFG Term Note, provided that NDX has asserted that its obligation to standstill under its subordination agreements will not be applicable at a time when the Company attains certain levels of unrestricted cash, as a result of the Company having improperly terminated the Merger Agreement. The Company does not believe it improperly terminated the Merger Agreement. The Company and NDX are currently negotiating a possible resolution or settlement of the Advance from NDX.
Note 7. Capital Stock
2019 Offerings
On January 9, 2019, we entered into an underwriting agreement with H.C. Wainwright & Co., LLC (“H.C. Wainwright”), relating to an underwritten public offering of
13,333,334
shares of our common stock for
$0.225
per share. We received proceeds from the offering of approximately
$2,437,000
, net of expenses and discounts of approximately
$563,000
.
On January 26, 2019, we issued
15,217,392
shares of common stock at a public offering price of
$0.23
per share. We received proceeds from the offering of approximately
$2,975,000
, net of expenses and discounts of approximately
$525,000
.
In May 2019, Iliad converted
$350,000
of the Convertible Note into an aggregate of
1,539,815
shares of our common stock at a conversion price of
$0.2273
per share.
Note 8. Stock-Based Compensation
We have
two
equity incentive plans: the 2008 Stock Option Plan (the “2008 Plan”) and the 2011 Equity Incentive Plan (the “2011 Plan”, and together with the 2008 Plan, the “Stock Option Plans”). The Stock Option Plans are meant to provide additional incentive to officers, employees and consultants to remain in our employment. Options granted are generally exercisable for up to
10 years
. Effective April 9, 2018, the Company cannot issue additional options from the 2008 Plan.
At
March 31, 2019
,
730,051
shares remain available for future awards under the 2011 Plan.
A summary of employee and non-employee stock option activity for the
three months ended March 31, 2019
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Weighted-
Average
Remaining
Contractual
Term (in years)
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
|
Number of
Shares
(in thousands)
|
|
Weighted-
Average
Exercise
Price
|
|
Outstanding January 1, 2019
|
3,004
|
|
|
$
|
5.77
|
|
|
5.70
|
|
$
|
—
|
|
Granted
|
95
|
|
|
0.44
|
|
|
|
|
|
Cancelled or expired
|
(809
|
)
|
|
8.00
|
|
|
|
|
|
Outstanding March 31, 2019
|
2,290
|
|
|
$
|
4.76
|
|
|
7.13
|
|
$
|
—
|
|
Exercisable March 31, 2019
|
1,189
|
|
|
$
|
7.94
|
|
|
5.42
|
|
$
|
—
|
|
Aggregate intrinsic value represents the difference between the fair value of our common stock and the exercise price of outstanding, in-the-money options.
As of
March 31, 2019
, total unrecognized compensation cost related to non-vested stock options granted to employees was
$780,553
which we expect to recognize over the next
3.20
years.
The fair value of options granted to employees is estimated on the grant date using the Black-Scholes option valuation model. This valuation model requires us to make assumptions and judgments about the variables used in the calculation, including the expected term (the period of time that the options granted are expected to be outstanding), the volatility of our common stock, a risk-free interest rate, and expected dividends. Forfeitures will be recorded when they occur. No compensation cost is recorded for options that do not vest. We use the simplified calculation of expected life described in the SEC’s Staff Accounting Bulletin No. 107,
Share-Based Payment
, and volatility is based on the historical volatility of our common stock. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. We use an expected dividend yield of
zero
, as we do not anticipate paying any dividends in the foreseeable future.
The following table presents the weighted-average assumptions used to estimate the fair value of options granted to employees during the periods presented:
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2019
|
Volatility
|
90.15
|
%
|
Risk free interest rate
|
2.54
|
%
|
Dividend yield
|
0.00
|
%
|
Term (years)
|
6.32
|
|
Weighted-average fair value of options granted during the period
|
$
|
0.34
|
|
Restricted stock awards have been granted to employees, directors and consultants as compensation for services. At
March 31, 2019
, there was
$34,285
of unrecognized compensation cost related to non-vested restricted stock granted to employees and directors; we expect to recognize the cost over
0.44
years.
The following table summarizes the activities for our non-vested restricted stock awards for the
three months ended March 31, 2019
:
|
|
|
|
|
|
|
|
|
Non-vested Restricted Stock Awards
|
|
Number of
Shares
(in thousands)
|
|
Weighted-Average Grant Date Fair Value
|
Non-vested at January 1, 2019
|
29
|
|
|
$
|
3.43
|
|
Cancelled
|
(1
|
)
|
|
6.30
|
|
Non-vested at March 31, 2019
|
28
|
|
|
$
|
3.33
|
|
The following table presents the effects of stock-based compensation related to stock option and restricted stock awards to employees and non-employees on our Consolidated Statements of Operations and Other Comprehensive Loss during the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
2019
|
|
2018
|
Cost of revenues
|
$
|
28
|
|
|
$
|
91
|
|
Research and development
|
8
|
|
|
15
|
|
General and administrative
|
116
|
|
|
158
|
|
Sales and marketing
|
6
|
|
|
10
|
|
Total stock-based compensation
|
$
|
158
|
|
|
$
|
274
|
|
Note 9. Warrants
On January 14, 2019, we issued
933,334
warrants to purchase common stock at
$0.2475
per share. The warrants are immediately exercisable and expire on January 9, 2024. On January 31, 2019 we issued
1,065,217
warrants to purchase common stock at
$0.253
per share. These warrants are immediately exercisable and expire on January 26, 2024. All of these warrants were issued in conjunction with the 2019 Offerings.
The following table summarizes the warrant activity for the
three months ended March 31, 2019
(in thousands, except exercise price):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued With / For
|
Exercise
Price
|
|
Warrants
Outstanding
January 1,
2019
|
|
2019 Warrants Issued
|
|
Warrants Outstanding March 31, 2019
|
Non-Derivative Warrants:
|
|
|
|
|
|
|
|
Financing
|
$
|
10.00
|
|
|
243
|
|
|
—
|
|
|
243
|
|
Financing
|
15.00
|
|
|
276
|
|
|
—
|
|
|
276
|
|
2015 Offering
|
5.00
|
|
|
3,450
|
|
|
—
|
|
|
3,450
|
|
2017 Debt
|
0.92
|
|
|
443
|
|
|
—
|
|
|
443
|
|
2019 Offering
|
0.2475
|
|
|
—
|
|
|
933
|
|
|
933
|
|
2019 Offering
|
0.253
|
|
|
—
|
|
|
1,065
|
|
|
1,065
|
|
Total non-derivative warrants
|
3.86
|
|
B
|
4,412
|
|
|
1,998
|
|
|
6,410
|
|
Derivative Warrants:
|
|
|
|
|
|
|
|
2016 Offerings
|
2.25
|
|
A
|
1,968
|
|
|
—
|
|
|
1,968
|
|
2017 Offering
|
2.35
|
|
A
|
3,500
|
|
|
—
|
|
|
3,500
|
|
2017 Offering
|
2.50
|
|
A
|
175
|
|
|
—
|
|
|
175
|
|
Total derivative warrants
|
2.32
|
|
B
|
5,643
|
|
|
—
|
|
|
5,643
|
|
Total
|
$
|
3.14
|
|
B
|
10,055
|
|
|
1,998
|
|
|
12,053
|
|
|
|
A
|
These warrants are subject to fair value accounting and contain a contingent net cash settlement feature. See Note 10.
|
|
|
B
|
Weighted-average exercise prices are as of
March 31, 2019
.
|
Note 10. Fair Value of Warrants
The following table summarizes the derivative warrant activity subject to fair value accounting for the
three months ended March 31, 2019
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued with/for
|
Fair value of warrants
outstanding as of
December 31, 2018
|
|
Change in fair
value of warrants
|
|
Fair value of warrants
outstanding as of
March 31, 2019
|
2016 Offerings
|
$
|
225
|
|
|
$
|
30
|
|
|
$
|
255
|
|
2017 Offering
|
23
|
|
|
(23
|
)
|
|
—
|
|
|
$
|
248
|
|
|
$
|
7
|
|
|
$
|
255
|
|
The derivative warrants issued as part of the 2016 Offerings are valued using a probability-weighted Binomial model, while the derivative warrants issued in conjunction with the 2017 Offering are valued using a Black-Scholes model. The following tables summarize the assumptions used in computing the fair value of derivative warrants subject to fair value accounting at
March 31, 2019
and
December 31, 2018
.
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Offerings
|
As of March 31, 2019
|
|
As of December 31, 2018
|
Exercise price
|
$
|
2.25
|
|
|
$
|
2.25
|
|
Expected life (years)
|
2.83
|
|
|
3.08
|
|
Expected volatility
|
108.55
|
%
|
|
100.51
|
%
|
Risk-free interest rate
|
2.21
|
%
|
|
2.46
|
%
|
Expected dividend yield
|
—
|
%
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
2017 Offering
|
As of March 31, 2019
|
|
As of December 31, 2018
|
Exercise price
|
$
|
2.36
|
|
|
$
|
2.36
|
|
Expected life (years)
|
0.19
|
|
|
0.44
|
|
Expected volatility
|
62.86
|
%
|
|
172.5
|
%
|
Risk-free interest rate
|
2.44
|
%
|
|
2.56
|
%
|
Expected dividend yield
|
—
|
%
|
|
—
|
%
|
Note 11. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Fair Value Measurements and Disclosures Topic of the FASB ASC requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, the Topic establishes a fair value hierarchy for valuation inputs that give the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that we have the ability to access as of the measurement date.
Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect our own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The following table summarizes the financial liabilities measured at fair value on a recurring basis segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
Total
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Warrant liability
|
$
|
255
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
255
|
|
Note payable
|
20
|
|
|
—
|
|
|
—
|
|
|
20
|
|
Other derivatives
|
55
|
|
|
—
|
|
|
—
|
|
|
55
|
|
|
$
|
330
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
Total
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
Warrant liability
|
$
|
248
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
248
|
|
Note payable
|
20
|
|
|
—
|
|
|
—
|
|
|
20
|
|
Other derivatives
|
86
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
86
|
|
|
$
|
354
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
354
|
|
At
March 31, 2019
and
December 31, 2018
, the Company had a liability payable to VenturEast from a prior acquisition. The ultimate payment to VenturEast will be the fair value of
84,278
shares of our common stock at the time of payment. During the
three months ended March 31, 2018
, we recorded a gain of approximately
$17,000
due to the change in value of the note. No adjustment was required during the
three months ended March 31, 2019
, as the closing price of our common stock on March 31, 2019 was the same as it was on December 31, 2018.
At
March 31, 2019
, the warrant liability consists of stock warrants issued as part of the 2016 Offerings and 2017 Offering that contain contingent net settlement features. In accordance with derivative accounting for warrants, we calculated the fair value of warrants and the assumptions used are described in Note 10, “Fair Value of Warrants.” During the
three months ended March 31, 2019
, we recognized a loss of approximately
$7,000
on the derivative warrants. During the
three months ended March 31, 2018
, we recorded a gain of approximately
$692,000
on the derivative warrants primarily due to changes in our stock price.
Realized and unrealized gains and losses related to the change in fair value of the VenturEast note, warrant liability and other derivatives are included in other income (expense) on the Consolidated Statements of Operations and Other Comprehensive Loss.
The following table summarizes the activity of the note payable to VenturEast and of our derivative warrants and other derivatives, which were measured at fair value using Level 3 inputs (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note Payable
|
|
Warrant
|
|
Other
|
|
to VenturEast
|
|
Liability
|
|
Derivatives
|
Fair value at December 31, 2018
|
$
|
20
|
|
|
$
|
248
|
|
|
$
|
86
|
|
Change in fair value
|
—
|
|
|
7
|
|
|
(31
|
)
|
Fair value at March 31, 2019
|
$
|
20
|
|
|
$
|
255
|
|
|
$
|
55
|
|
Note 12. Joint Venture Agreement
In
November 2011
, we entered into an affiliation agreement with the Mayo Foundation for Medical Education and Research (“Mayo”), subsequently amended. Under the agreement, we formed a joint venture with Mayo in May 2013 to focus on developing oncology diagnostic services and tests utilizing next generation sequencing. The joint venture is a limited liability
company, with each party initially holding
fifty percent
of the issued and outstanding membership interests of the new entity (the “JV”).
The agreement requires aggregate capital contributions by us of up to
$6.0 million
, of which
$2.0 million
has been paid to date. The timing of the remaining installments is subject to the JV's achievement of certain operational milestones agreed upon by the board of governors of the JV. In exchange for its membership interest, Mayo’s capital contribution takes the form of cash, staff, services, hardware and software resources, laboratory space and instrumentation, the fair market value of which will be approximately equal to
$6.0 million
. Mayo’s continued contribution will also be conditioned upon the JV’s achievement of certain milestones. We are in the process of winding down the JV.
During the
three months ended March 31, 2019
, there was
no
activity in the JV. Our share of the JV’s net loss was approximately
$2,000
for the
three months ended March 31, 2018
, and is included in research and development expense on the Consolidated Statements of Operations and Other Comprehensive Loss. We have a net receivable due from the JV of approximately
$10,000
at
March 31, 2019
, which is included in other assets in the Consolidated Balance Sheets.
The joint venture is considered a variable interest entity under ASC 810-10, but we are not the primary beneficiary as we do not have the power to direct the activities of the JV that most significantly impact its performance. Our evaluation of ability to impact performance is based on our equal board membership and voting rights and day-to-day management functions which are performed by the Mayo personnel.
Note 13. Related Party Transactions
We had a consulting agreement with Equity Dynamics, Inc. (“EDI”), an entity controlled by the Chairman of our Board of Directors, John Pappajohn, effective April 1, 2014 through August 31, 2018, pursuant to which EDI received a monthly fee of
$10,000
. Total expenses for the
three months ended March 31, 2018
were
$30,000
. As of
March 31, 2019
, we owed EDI
$70,000
.
As described in Note 1, the Company closed
two
public offerings in January 2019, in which various executives and directors purchased shares at the public offering price. On January 14, 2019, John Pappajohn, John Roberts, our President and Chief Executive Officer, and Geoffrey Harris, a Director, purchased
1,000,000
shares,
100,000
shares and
100,000
shares, respectively, at the public offering price of
$0.225
per share. On January 31, 2019, John Pappajohn, John Roberts, Edmund Cannon, a Director, and M. Glenn Miles, our Chief Financial Officer, purchased
1,000,000
shares,
185,436
shares,
43,479
shares and
150,000
shares, respectively, at the public offering price of
$0.23
per share.
Note 14. Contingencies
On April 5, 2018 and April 12, 2018, purported stockholders of the Company filed nearly identical putative class action lawsuits in the U.S. District Court for the District of New Jersey, against the Company, Panna L. Sharma, John A. Roberts, and Igor Gitelman, captioned
Ben Phetteplace v. Cancer Genetics, Inc. et al
., No. 2:18-cv-05612 and
Ruo Fen Zhang v. Cancer Genetics, Inc. et al.
, No. 2:18-06353, respectively. The complaints alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and SEC Rule 10b-5 based on allegedly false and misleading statements and omissions regarding our business, operational, and financial results. The lawsuits sought, among other things, unspecified compensatory damages in connection with purchases of our stock between March 23, 2017 and April 2, 2018, as well as interest, attorneys’ fees, and costs. On August 28, 2018, the Court consolidated the two actions in one action captioned
In re Cancer Genetics, Inc. Securities Litigation
(the “Securities Litigation”) and appointed shareholder Randy Clark as the lead plaintiff. On October 30, 2018, the lead plaintiff filed an amended complaint, adding Edward Sitar as a defendant and seeking, among other things, compensatory damages in connection with purchases of CGI stock between March 10, 2016 and April 2, 2018. On December 31, 2018, Defendants filed a motion to dismiss the amended complaint for failure to state a claim. The Company is unable to predict the ultimate outcome of the Securities Litigation and therefore cannot estimate possible losses or ranges of losses, if any.
In addition, on June 1, 2018, September 20, 2018, and September 25, 2018, purported stockholders of the Company filed nearly identical derivative lawsuits on behalf of the Company in the U.S. District Court for the District of New Jersey against the Company (as a nominal defendant) and current and former members of the Company’s Board of Directors and current and former officers of the Company. The three cases are captioned:
Bell v. Sharma et al.
, No. 2:18-cv-10009-CCC-MF,
McNeece v. Pappajohn et al.
, No. 2:18-cv-14093, and
Workman v. Pappajohn, et al.
, No. 2:18-cv-14259 (the “Derivative Litigation”). The complaints allege claims for breach of fiduciary duty, violations of Section 14(a) of the Securities Exchange Act of 1934 (premised upon alleged omissions in the Company’s 2017 proxy statement), and unjust enrichment, and allege that the individual defendants failed to implement and maintain adequate controls, which resulted in ineffective disclosure controls and
procedures, and conspired to conceal this alleged failure. The lawsuits seek, among other things, damages and/or restitution to the Company, appropriate equitable relief to remedy the alleged breaches of fiduciary duty, and attorneys’ fees and costs. On November 9, 2018, the Court in the
Bell v. Sharma
action entered a stipulation filed by the parties staying the
Bell
action until the Securities Litigation is dismissed, with prejudice, and all appeals have been exhausted; or the defendants’ motion to dismiss in the Securities Litigation is denied in whole or in part; or either of the parties in the
Bell
action gives 30 days’ notice that they no longer consent to the stay. On December 10, 2018, the parties in the
McNeece
action filed a stipulation that is substantially identical to the
Bell
stipulation. On February 1, 2019, the Court in the Workman action granted a stipulation that is substantially identical to the Bell stipulation. The Company is unable to predict the ultimate outcome of the Derivative Litigation and therefore cannot estimate possible losses or ranges of losses, if any.
Note 15. Subsequent Events
Sale of NOL’s
On April 4, 2019, we sold
$11,638,516
of gross State of New Jersey NOL’s relating to the 2017 tax year as well as
$71,968
of state research and development tax credits. The sale resulted in the net receipt by the Company of approximately
$512,000
. This figure includes all costs and expenses associated with the sale of these state tax attributes as deducted from the gross sales price of approximately
$521,000
.
Second Standstill
On May 3, 2019, we entered into the Second Standstill with Iliad. The Second Standstill provides that Iliad will not seek to redeem any portion of the Convertible Note until May 31, 2019. In consideration for the Second Standstill, we agreed to adjust the conversion price on the first
$1,250,000
of our debt to Iliad from
$0.80
to
$0.2273
. The remaining balance will still be convertible at
$0.80
per share. On May 6, 2019 and May 8, 2019, Iliad converted an aggregate of
$350,000
of the Convertible Note balance into
1,539,815
shares of our common stock at
$0.2273
per share.
Nasdaq Notifications
Our common stock is listed on the Nasdaq Capital Market. In order to maintain that listing, we must satisfy minimum financial and other requirements including, without limitation, a requirement that our closing bid price be at least
$1.00
per share and that we hold an annual meeting of stockholders within
twelve months
of the end of our fiscal year. In addition, on January 29, 2019, the Company received written notice from the Listing Qualifications Staff of The Nasdaq Stock Market (“Nasdaq”) notifying the Company that it was required to seek stockholder approval of the execution of the NDX Credit Agreement, under which the Company was advanced
$1,500,000
, the outstanding balance of which, including interest, is convertible, at the option of NDX, into shares of common stock at a conversion price of
$0.606
per share, due to the potential for the Company, upon a conversion of such outstanding balance, with interest, to be required to issue common stock at a discount to the market price of the common stock on the day of execution of such agreement in excess of
20%
of the pre-transaction outstanding shares of common stock, pursuant to Nasdaq Listing Rule 5635(d) (the “Approval Requirement”).
Nasdaq’s notice had no immediate effect on the listing of the common stock on the Nasdaq Capital Market. Under Nasdaq Listing Rule 5810(c)(2)(C), the Company had
45
calendar days from January 29, 2019 to submit to Nasdaq a plan to regain compliance with the Approval Requirement, which the Company submitted on March 15, 2019, and which was approved on May 15, 2019, subject to the Company’s shareholders approving the potential issuances to Novellus at the annual meeting of shareholders currently scheduled for May 31, 2019, or the Company otherwise curing the deficiency on or before May 31, 2019. There can be no assurance that the shareholders will approve such issuances.
On January 3, 2019, we received written notice from the Listing Qualifications Staff Nasdaq notifying us that we no longer comply with Nasdaq Listing Rule 5620(a) due to our failure to hold an annual meeting of stockholders within twelve months of the end of our fiscal year ended December 31, 2017 (the “Annual Meeting Requirement”). We had
45
calendar days from January 3, 2019, or until February 19, 2019, to submit to Nasdaq a plan to regain compliance with the Annual Meeting Requirement, which we submitted on February 19, 2019. On May 15, 2019, Nasdaq accepted our plan subject to our holding our annual meeting on May 31, 2019.
On November 13, 2018, we received a written notice from Nasdaq indicating that we were not in compliance with the minimum bid price requirement for continued listing on the Nasdaq Capital Market. We had
180
calendar days in which to regain compliance, or until May 13, 2019, which we did not do. On May 15, 2019, Nasdaq granted us an additional
180
days within which to regain compliance.