UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



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

For the quarterly period ended ~~September 30, 2017~~March 31, 2020



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35817

CANCER GENETICS, INC.

(Exact name of registrant as specified in its charter)



Delaware		04-3462475
(State or ~~other jurisdiction~~Other Jurisdiction of ~~incorporation~~Incorporation or ~~organization)~~Organization		(I.R.S. Employer Identification No.)

~~201 Route 17 North 2~~nd ~~Floor~~

~~Rutherford, NJ~~



201 Route 17 North 2nd Floor Rutherford, NJ		07070
Address of Principal Executive Offices		Zip Code

(201) 528-9200

~~(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)~~Registrant’s Telephone Number, Including Area Code

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading symbol	Name of exchange on which registered
Common Stock, $0.0001 par value per share	CGIX	NASDAQ Capital Market

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 ý 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 ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨	Accelerated filer	¨

Non-accelerated filer	¨ ~~(Do not check if a smaller reporting company)~~ x	Smaller reporting company	x

		Emerging growth company	x¨

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. x¨

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

As of ~~November 6, 2017,~~June 19, 2020, there were ~~24,253,831~~2,260,883 shares of common stock, par value $0.0001 of Cancer Genetics, Inc. outstanding.

CANCER GENETICS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS



PART I—FINANCIAL INFORMATION

Item 1.	Condensed Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Operations and Other Comprehensive ~~Loss~~Income (Loss)(Unaudited)	3
	Condensed Consolidated Statements of ~~Cash Flows~~Changes in Stockholders’ Equity (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)	5
	Notes to Unaudited Condensed Consolidated Financial Statements	67

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1719

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3028

Item 4.	Controls and Procedures	3028

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	3130

Item 1A.	Risk Factors	3130

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds from Sales of Registered Securities	3431

Item 3.	Defaults Upon Senior Securities	3431

Item 4.	Mine Safety Disclosures	3431

Item 5.	Other Information	3431

Item 6.	Exhibits	3431

SIGNATURE		3532

INDEX TO EXHIBITS		3633

PART I — FINANCIAL INFORMATION

Item 1. Condensed Financial Statements (Unaudited)

Cancer Genetics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except par value)


	September 30, 2017			December 31, 2016			March 31, 2020		December 31, 2019
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	4,807		$	9,502		$	3,593	$	3,880
Accounts receivable, net of allowance for doubtful accounts of 2017 $2,277; 2016 $1,387	15,797			11,748
Restricted cash							350		350
Accounts receivable							848		696
Earn-Out from siParadigm, current portion							772		747
Excess Consideration Note							888		888
Other current assets	2,881			2,174			415		546
Current assets of discontinuing operations							—		71
Total current assets	23,485			23,424			6,866		7,178
FIXED ASSETS, net of accumulated depreciation	6,009			4,738			506		558
OTHER ASSETS
Restricted cash	300			300
Operating lease right-of-use assets							76		94
Earn-Out from siParadigm, less current portion							201		356
Patents and other intangible assets, net of accumulated amortization	8,356			1,503			2,816		2,895
Investment in joint venture	247			268			92		92
Goodwill	14,158			12,029			3,090		3,090
Other	1,415			172			635		641
Total other assets	24,476			14,272			6,910		7,168
Total Assets	$	53,970		$	42,434		$	14,282	$	14,904
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	9,314		$	8,148		$	2,146	$	2,072
Obligations under capital leases, current portion	271			109
Obligations under operating leases, current portion							153		193
Obligations under finance leases, current portion							66		68
Deferred revenue	109			789			1,118		1,217
Line of credit	2,000			—
Term note, current portion	—			2,000
Note payable, net							1,313		1,277
Advance from NovellusDx, Ltd., net							200		350
Advance from siParadigm, current portion							573		566
Due to Interpace Biosciences, Inc.							1,200		—
Current liabilities of discontinuing operations							861		1,229
Total current liabilities	11,694			11,046			7,630		6,972
Term note	4,936			2,654
Obligations under capital leases	726			374
Deferred rent payable and other	181			290
Obligations under operating leases, less current portion							21		10
Obligation under finance leases, less current portion							81		107
Advance from siParadigm, less current portion							119		252
Warrant liability	4,167			2,018			51		178
Deferred revenue, long-term	1,130			428
Total Liabilities	22,834			16,810			7,902		7,519
STOCKHOLDERS’ EQUITY
Preferred stock, authorized 9,764 shares, $0.0001 par value, none issued	—			—			—		—
Common stock, authorized 100,000 shares, $0.0001 par value, 24,252 and 18,936 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively	2			2
Common stock, authorized 100,000 shares, $0.0001 par value, 2,107 and 2,104 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively							—		—
Additional paid-in capital	158,068			139,576			171,853		171,783
Accumulated other comprehensive (loss)	(1		)	—
Accumulated (deficit)	(126,933		)	(113,954		)
Total Stockholders’ Equity	31,136			25,624
Total Liabilities and Stockholders’ Equity	$	53,970		$	42,434
Accumulated other comprehensive income							130		26



Accumulated deficit	(165,603		)	(164,424		)
Total Stockholders’ Equity	6,380			7,385
Total Liabilities and Stockholders’ Equity	$	14,282		$	14,904

See Notes to Unaudited Condensed Consolidated Financial Statements.

Cancer Genetics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Other Comprehensive ~~Loss~~Income (Loss) (Unaudited)

(in thousands, except per share amounts)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2020			2019
Revenue	$	8,028		$	6,750		$	21,598		$	19,819		$	1,426		$	1,822
Cost of revenues	4,588			4,444			12,831			12,832			814			1,002
Gross profit	3,440			2,306			8,767			6,987			612			820
Operating expenses:
Research and development	981			1,594			3,080			4,806
General and administrative	4,346			3,701			11,352			11,677			1,533			1,782
Sales and marketing	1,301			1,054			3,437			3,731			341			185
Total operating expenses	6,628			6,349			17,869			20,214			1,874			1,967
Loss from operations	(3,188		)	(4,043		)	(9,102		)	(13,227		)	(1,262		)	(1,147		)
Other income (expense):
Interest expense	(350		)	(111		)	(797		)	(344		)	(78		)	(615		)
Interest income	10			4			37			21			4			2
Change in fair value of acquisition note payable	105			18			(114		)	119			4			—
Change in fair value of other derivatives													—			31
Change in fair value of warrant liability	2,790			712			(3,927		)	729			127			(7		)
Other expense	—			(325		)	(46		)	(325		)
Total other (expense)	2,555			298			(4,847		)	200
Change in fair value of siParadigm Earn-Out													24			—
Total other income (expense)													81			(589		)
Loss before income taxes	(633		)	(3,745		)	(13,949		)	(13,027		)	(1,181		)	(1,736		)
Income tax (benefit)	—			—			(970		)	—
Net (loss)	$	(633	)	$	(3,745	)	$	(12,979	)	$	(13,027	)
Basic net (loss) per share	$	(0.03	)	$	(0.23	)	$	(0.65	)	$	(0.88	)
Diluted net (loss) per share	$	(0.15	)	$	(0.23	)	$	(0.65	)	$	(0.88	)
Basic weighted-average shares outstanding	21,577			16,519			20,059			14,868
Diluted weighted-average shares outstanding	22,359			16,519			20,059			14,868
Income tax expense													6			—
Loss from continuing operations													(1,187		)	(1,736		)
Income (loss) from discontinuing operations													8			(2,881		)
Net loss													(1,179		)	(4,617		)
Foreign currency translation gain (loss)													104			(76		)
Comprehensive loss													$	(1,075	)	$	(4,693	)

Net (loss)	(633		)	(3,745		)	(12,979		)	(13,027		)
Foreign currency translation (loss)	(1		)	—			(1		)	—
Comprehensive (loss)	(634		)	(3,745		)	(12,980		)	(13,027		)
Basic and diluted net loss per share from continuing operations													$	(0.56	)	$	(1.06	)
Basic and diluted net loss per share from discontinuing operations													—			(1.77		)
Basic and diluted net loss per share													$	(0.56	)	$	(2.83	)

Basic and diluted weighted-average shares outstanding													2,106			1,631

See Notes to Unaudited Condensed Consolidated Financial Statements.

Cancer Genetics, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

(in thousands)



	Three Months Ended March 31, 2020
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit			Total
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income		Accumulated Deficit			Total
Balance, January 1, 2020	2,104	$	—	$	171,783	$	26	$	(164,424	)	$	7,385
Stock based compensation—employees	—	—		58		—		—			58
Issuance of common stock—VenturEast settlement	3	—		12		—		—			12
Unrealized gain on foreign currency translation	—	—		—		104		—			104
Net loss	—	—		—		—		(1,179		)	(1,179		)
Balance, March 31, 2020	2,107	$	—	$	171,853	$	130	$	(165,603	)	$	6,380



	Three Months Ended March 31, 2019
	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total
	Shares	Amount		Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Total
Balance, January 1, 2019	924	$	—	$	164,458	$	60		$	(157,716	)	$	6,802
Stock based compensation—employees	—	—		158		—			—			158
Issuance of common stock - 2019 Offerings, net	952	—		5,412		—			—			5,412
Unrealized loss on foreign currency translation	—	—		—		(76		)	—			(76		)
Net loss	—	—		—		—			(4,617		)	(4,617		)
Balance, March 31, 2019	1,876	$	—	$	170,028	$	(16	)	$	(162,333	)	$	7,679

See Notes to Unaudited Condensed Consolidated Financial Statements.

Cancer Genetics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)



	Three Months Ended March 31,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,179	)	$	(4,617	)
Loss (income) from discontinuing operations	(8		)	2,881
Net loss from continuing operations	(1,187		)	(1,736		)

Adjustments to reconcile net loss to net cash used in operating activities, continuing operations:
Depreciation	52			14
Amortization	79			82
Stock-based compensation	58			119
Change in fair value of warrant liability, acquisition note payable and other derivatives	(131		)	(24		)
Amortization of operating lease right-of-use assets	10			49
Change in fair value of siParadigm Earn-Out	(24		)	—
Amortization of discount on debt and debt issuance costs	36			467
Interest added to Convertible Note	—			89
Changes in:
Accounts receivable	(183		)	(103		)
Other current assets	110			77
Other non-current assets	(4		)	(1		)
Accounts payable, accrued expenses and deferred revenue	130			(109		)
Due to Interpace Biosciences, Inc.	1,200			—
Obligations under operating leases	(21		)	(60		)
Net cash provided by (used in) operating activities, continuing operations	125			(1,136		)
Net cash used in operating activities, discontinuing operations	(289		)	(3,328		)
Net cash used in operating activities	(164		)	(4,464		)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets	—			(19		)
Net cash provided by (used in) investing activities, continuing operations	—			(19		)
Net cash provided by (used in) investing activities, discontinuing operations	28			(13		)
Net cash provided by (used in) investing activities	28			(32		)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on obligations under finance leases	(13		)	(10		)
Proceeds from offerings of common stock, net of certain offering costs	—			5,412
Payments on Advance from NovellusDx, Ltd.	(150		)	—
Net cash provided by (used in) financing activities, continuing operations	(163		)	5,402
Net cash used in financing activities, discontinuing operations	—			(291		)
Net cash provided by (used in) financing activities	(163		)	5,111
Effect of foreign exchange rates on cash and cash equivalents and restricted cash	12			(79		)
Net increase (decrease) in cash and cash equivalents and restricted cash	(287		)	536
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

Nine Months Ended September 30,
2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) $ (12,979 ) $ (13,027 )
Adjustments to reconcile net (loss) to net cash (used in) operating activities:
Depreciation 1,436
1,502
Amortization 234
260
Provision for bad debts 890
8
Stock-based compensation 1,395
1,538
Change in fair value of acquisition note payable 114
(119 )
Change in fair value of warrant liability 3,927
(729 )
Amortization of debt issuance costs 51
9
Amortization of discount on debt 134
—
Loss in equity method investment 21
45
Loss on extinguishment of debt 78
—
Changes in:
Accounts receivable (4,029 ) (7,066 )
Other current assets (606 ) (67 )
Other non-current assets 251
(9 )
Accounts payable, accrued expenses and deferred revenue (1,057 ) 372
Deferred rent payable and other (109 ) (16 )
Net cash (used in) operating activities (10,249 ) (17,299 )
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (1,192 ) (345 )
Patent costs (73 ) (127 )
Purchase of cost method investment (200 ) —
Acquisition of vivoPharm, Pty Ltd., net of cash acquired (656 ) —
Net cash (used in) investing activities (2,121 ) (472 )
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on capital lease obligations (170 ) (101 )
Proceeds from warrant exercises 1,827
—
Proceeds from option exercises 7
—
Proceeds from offerings of common stock with derivative warrants, net of certain offering costs —
9,962
Proceeds from borrowings on Silicon Valley Bank line of credit 2,000
—
Proceeds from Partners for Growth IV, L.P. term note 6,000
—
Proceeds from Aspire Capital common stock purchases, net of certain offering costs 2,965
—
Principal payments on Silicon Valley Bank term note (4,667 ) (833 )
Payment of debt issuance costs and loan fees (287 ) —
Net cash provided by financing activities 7,675
9,028
Net (decrease) in cash and cash equivalents (4,695 ) (8,743 )
CASH AND CASH EQUIVALENTS
Beginning 9,502
19,459
Ending $ 4,807
$ 10,716
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for interest $ 633
$ 250
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Fixed assets acquired through capital lease arrangements $ 567
$ —
Derivative warrants issued with debt 1,004
—
Acquisition of vivoPharm business 9,856
—



Beginning	4,230		511
Ending	$	3,943	$	1,047

RECONCILIATION OF CASH AND CASH EQUIVALENTS AND RESTRICTED
CASH TO THE CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents	$	3,593	$	697
Restricted cash	350		350
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH	$	3,943	$	1,047



SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for interest	$	7	$	304
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Common stock issued in VentureEast settlement	$	12	$	—

See Notes to Unaudited Condensed Consolidated Financial Statements.

Notes to Unaudited Condensed Consolidated Financial Statements (dollars, shares, options and warrants in thousands, except per share amounts)

Note 1. Organization, Description of Business, Basis of Presentation, ~~Acquisition~~Reverse Stock Split, Business Disposals, 2019 Offerings, Standstill Agreement, Advance from NovellusDx, Ltd., Loan from Atlas Sciences, LLC, Recently Adopted Accounting Standard, and Recent Accounting Pronouncements

~~We are~~Cancer Genetics, Inc. (the "Company") supports the efforts of the biotechnology and pharmaceutical industries to develop innovative new drug therapies. Until the closing of the Business Disposals (as defined below) in July 2019, the Company was an emerging leader in ~~the field of~~enabling precision medicine ~~enabling~~in oncology by providing multi-disciplinary diagnostic and data solutions, facilitating individualized therapies ~~in the field of oncology~~ through ~~our~~its diagnostic ~~products and~~tests, services and molecular markers. ~~We develop, commercialize~~Following the Business Disposals described below, the Company currently has an extensive set of anti-tumor referenced data based on predictive xenograft and provide molecular- and biomarker-based tests and services that enable physicians to personalize the clinical management of each individual patient by providing genomic information to better diagnose, monitor and inform cancer treatment and that enable biotech and pharmaceutical companies engaged in oncology trials to better select candidate populations and reduce adverse drug reactions by providing information regarding genomic factors influencing subject responses to therapeutics. We have a comprehensive, disease-focused oncology testing portfolio. Our tests and techniques target a wide range of cancers, covering nine of the top ten cancers in prevalence in the United States, with additional unique capabilities offered by our FDA-cleared Tissue of Origin® test for identifying difficult to diagnosesyngeneic tumor ~~types or poorly differentiated metastatic disease. Following~~models from the acquisition of ~~vivoPharm,~~ vivoPharm, Pty Ltd. (“~~vivoPharm”~~vivoPharm”)~~, as discussed~~ in ~~more detail below, we~~2017, to provide Discovery Services such as contract research services, focused primarily on unique specialized studies to guide drug discovery and development programs in the oncology and ~~immune-oncology~~immuno-oncology fields.

~~We were~~The Company was incorporated in the State of Delaware on April 8, 1999 and, ~~have~~until the Business Disposals, had offices and state-of-the-art laboratories located in ~~California,~~ New Jersey and North Carolina and today continues to have laboratories in Pennsylvania ~~Shanghai (China), Victoria (Australia)~~ and ~~Hyderabad (India). Our laboratories comply with the highest regulatory standards as appropriate for the~~Australia. The Company’s corporate headquarters are in Rutherford, New Jersey. The Company offers preclinical services they deliver including CLIA, CAP, NY State, California State and NABL (India). 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,~~predictive tumor models, human orthotopic xenografts and syngeneic immuno-oncology relevant tumor models in its Hershey PA facility, and is a leader in the ~~National Cancer Institute.~~field of immuno-oncology preclinical services in the United States. This service is supplemented with GLP toxicology and extended bioanalytical services in its Australian-based facilities in Clayton, Victoria. Beginning in February 2020, the Company also has an animal testing facility and laboratory in Gilles Plains, South Australia, Australia.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ~~(“GAAP”~~("GAAP") for interim financial information and with the instructions for interim reporting as prescribed by the Securities and Exchange ~~Commission.~~Commission ("SEC"). 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~~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, ~~2016,~~2019, filed with the ~~Securities and Exchange Commission~~SEC on ~~March 23, 2017.~~May 29, 2020. The condensed consolidated balance sheet as of December 31, ~~2016,~~2019, 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, ~~2017.~~

~~Foreign Currency Translation~~2020.

~~During~~Reverse Stock Split

On October 24, 2019, the Company amended its Certificate of Incorporation and effected a 30-for-1 reverse stock split of its common stock. All shares and per share information referenced throughout the condensed consolidated financial statements and footnotes have been retrospectively adjusted to reflect the reverse stock split.

Business Disposals - Discontinuing Operations

Interpace Diagnostics Group, Inc.

On July 15, 2019, the Company entered into a secured creditor asset purchase agreement (the “BioPharma Agreement”) by and among the Company, Gentris, LLC, a wholly-owned subsidiary of the Company, Partners for Growth IV, L.P. (“PFG”), Interpace Biosciences, Inc. (“IDXG”) and a newly-formed subsidiary of IDXG, Interpace BioPharma, Inc. (“Buyer”). The BioPharma Agreement provided for a consensual private foreclosure sale by PFG of all assets relating to the Company’s BioPharma Business (as defined in the BioPharma Agreement) to Buyer (the “BioPharma Disposal”).

Term Note”), and to satisfy certain transaction expenses. The balance of $2.3 million was delivered to the Company in addition to the Excess Consideration Note.

The Excess Consideration Note, which required interest-only quarterly payments at a rate of 6% per year, matured in October 2019 and was settled on October 24, 2019 for $6.0 million, including interest of $24 thousand. The Buyer withheld from the settlement of the Excess Consideration Note approximately $775 thousand for a net worth adjustment (assets less liabilities) of the BioPharma business (“Net Worth”), $153 thousand to secure collection of certain older accounts receivable of the Company purchased by Buyer (“AR Holdback”) and an additional $735 thousand as security for indemnification obligations of the Company for any breaches of certain limited warranties and covenants of the Company and other specified items (“Indemnification Holdback”). The Company received the full amounts of the AR Holdback and the Indemnification Holdback in April and May 2020. The fair value of the Excess Consideration Note was $888 thousand at March 31, 2020.

The Company and Buyer also entered into a transition services agreement (the “TSA”) pursuant to which the Company and Buyer are providing certain services to each other to accommodate the transition of the BioPharma Business to Buyer. In particular, the Company agreed to provide to Buyer, among other things, certain personnel services, payroll processing, administration services and benefit administration services (collectively, the “Payroll and Benefits Services”), for a reasonable period commencing July 15, 2019, subject to the terms and conditions of the TSA, in exchange for payment or reimbursement, as applicable, by Buyer for the costs related thereto, including salaries and benefits for certain of the Company’s BioPharma employees during the transition period. The Buyer paid for certain costs of the Company under the TSA with respect to a limited number of employees and professionals. Such shared services amounted to $102 thousand for the quarter ended March 31, 2020. In addition, the Buyer is reimbursing the Company, in part, for the salaries and benefits of John A. Roberts, the Company’s Chief Executive Officer, and Glenn Miles, the Company’s Chief Financial Officer. The reimbursed portion of such salaries and benefits amounted to $102 thousand for the quarter ended March 31, 2020. Including the amounts due under the TSA described above, the net amount due to the Buyer is approximately $1.3 million at March 31, 2020. This net amount was subsequently remitted under the TSA arrangement.

In connection with the closing of the BioPharma Disposal, the SVB ABL and the PFG Term Note were terminated, and all related liens were released.

siParadigm, Inc.

On July 5, 2019, the Company entered into an asset purchase agreement (the “Clinical Agreement”) by and among the Company and siParadigm, LLC (“siParadigm”), pursuant to which the Company sold to siParadigm, certain assets associated with the Company’s clinical laboratory business (the “Clinical Business,” and such assets, the “Designated Assets”), and agreed to cease operating its Clinical Business. The Designated Assets include intellectual property, equipment and customer lists associated with the Clinical Business, and the Company is providing certain transitional services to siParadigm pursuant to the Clinical Agreement. The cash consideration paid by siParadigm at closing was approximately $747 thousand, which includes approximately $45 thousand for certain equipment plus a $1.0 million advance payment of the Earn-Out (as defined below), less approximately $177 thousand of supplier invoices paid directly by siParadigm, an adjustment of $11 thousand and transaction costs of approximately $110 thousand. The Clinical Business sale (together with the BioPharma Disposal, the “Business Disposals”) was completed on July 8, 2019.

The Earn-Out, to be paid over the 24 months post-closing, is based on fees for all tests performed by siParadigm for the Company’s clinical customers during the 12-month period following the closing (the “Earn-Out”). At March 31, 2020, the fair value of the current and long-term portion of the Earn-Out from siParadigm was approximately $772 thousand and $201 thousand, respectively. In addition, the current and long-term portion of the Advance from siParadigm was approximately $573 thousand and $119 thousand, respectively.

Under the Clinical Agreement, the Company agreed to certain non-competition and non-solicitation provisions, including that it cease performing certain clinical tests and will not solicit or seek business from certain of its customers (other than for the Company’s other lines of business) for a period of three years following the closing date (through July 2022).

The Business Disposals have been classified as discontinuing operations in conformity with GAAP. Accordingly, BioPharma and Clinical operations and balances have been reported as discontinuing operations and removed from all financial disclosures of continuing operations. As permitted by Accounting Standards Codification (“ASC”) 205-20, the Company elected to allocate approximately $786 thousand of interest expense on the convertible promissory note (“Convertible Note”) to Iliad Research and Trading, L.P. (“Iliad”) and Advance from NovellusDx, Ltd. (“NDX”) that was not required to be repaid to discontinuing operations during the three months ended ~~September 30, 2017, we started accounting for our foreign currency translation~~March 31, 2019. Unless otherwise indicated, information in other comprehensive income (loss). Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. Translation adjustments for prior periods have not been presented, as they are not material.these notes to unaudited condensed consolidated financial statements relates to continuing operations.

~~Liquidity and~~

Note 2. Going Concern

At ~~September 30, 2017, our cash position and~~March 31, 2020, the Company's history of losses required management to ~~asses our~~assess its ability to continue operating as a going concern, according to ~~FASB Accounting Standards Update No. 2014-15, Disclosure~~ASC 2015-40, Going Concern. Even after the disposal of ~~Uncertainties about an Entity’s Ability~~the Company's BioPharma Business and Clinical Business discussed in Note 1, the Company does not project that cash at March 31, 2020 will be sufficient to ~~Continue as a Going Concern (“ASU 2014-15”). Management evaluated~~fund normal operations for the ~~history and operational losses to have a material effect~~twelve months from the issuance of these financial statements in the Quarterly Report on ~~our~~Form 10-Q. The Company's ability to continue as a going concern ~~unless we take actions~~is dependent on reduced losses and improved future cash flows. Alternatively, the Company may be required to ~~alleviate those conditions. Our primary sources of liquidity have been funds generated from our~~raise additional equity or debt ~~financings and equity financings. We have reduced, and plan~~capital, or consummate other strategic transactions. These factors raise substantial doubt about the Company's ability to continue reducing, our operating expenses, and expect to grow our revenue in 2017 and beyond, and have also increased our cash collections from our customers and third-party payors and plan to continue to improve our cash collection results.

~~Management believes that its existing cash and cash equivalents, taken together with~~as a going concern for the borrowings available from the Silicon Valley Bank line of credit and the common stock purchase agreement with Aspire Capital Fund, LLC (described in Note 3), will be sufficient to fund the Company's operations for at least the next twelve months after filing this quarterly report on Form 10-Q.

~~Acquisition of vivoPharm~~

On August 15, 2017, we purchased all of the outstanding stock of vivoPharm, with its principal place of business in Victoria, Australia, in a transaction valued at approximately $1.2 million in cash, $9.5 million in the Company's common stock based on the closing price of the stock on August 15, 2017, plus an estimated settlement of $345,000 for excess working capital in accounts payable and accrued expenses in the accompanying balance sheet. The Company has deposited in escrow 20% of the stock consideration until the expiration of twelve months from the ~~closing date to serve as~~issuance of these financial statements in the ~~initial source for any indemnification claims and adjustments.~~Quarterly Report on Form 10-Q. The Company ~~had an estimated $150,000 in transaction costs associated with the purchase of vivoPharm, which were expensed during the three and nine months ended September 30, 2017.~~

~~Prior to the acquisition, vivoPharm was a contract research organization (“CRO”)~~can provide no assurance that specialized in planning and conducting unique, specialized studies to guide drug discovery and development programs with a concentration in oncology and immuno-oncology. The transaction is being accounted for using the acquisition method of accounting for business combinations in accordance with GAAP. Under this method, the total consideration transferred to consummate the acquisition is being allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the closing date of the acquisition. The acquisition method of accounting requires extensive use of estimates and judgments to allocate the consideration transferred to the identifiable tangible and intangible assets acquired and liabilities assumed. Accordingly, the allocation of the consideration transferred is preliminary andthese actions will be ~~adjusted upon completion~~successful or that additional sources of ~~the final valuation of the assets acquired and liabilities assumed. The final valuation is expected to~~financing will be ~~completed as soon as practicable but no later than twelve months after the closing date of the acquisition.~~available on favorable terms, if at all.

The ~~estimated allocation~~condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to

continue as a going concern.

On March 11, 2020 the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide. In addition, the Company is located in New Jersey and was under a shelter-in-place mandate. Many of the ~~purchase price as of August 15, 2017 consists~~Company's customers worldwide were similarly impacted. The global outbreak of the ~~following (in thousands):~~

Cash $ 544
Accounts receivable 905
Lab supplies 1,258
Prepaid expenses and other current assets 101
Fixed assets 949
Intangible assets 7,014
Goodwill 2,129
Accounts payable and accrued expenses (913 )
Deferred revenue (814 )
Obligations under capital leases (117 )
Total purchase price $ 11,056

~~The following table provides certain pro forma financial information for~~COVID-19 continues to rapidly evolve, and the extent to which the COVID-19 may impact the Company's business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. As a healthcare provider, the Company ~~as if the acquisition of vivoPharm discussed above occurred on January 1, 2016 (in thousands except per share amounts):~~

Three Months Ended September 30 Nine Months Ended September 30,
2017 2016 2017 2016
Revenue $ 9,069
$ 7,958
$ 25,335
$ 23,595
Net loss (976 ) (3,919 ) (13,788 ) (13,596 )

Basic net loss per share $ (0.04 ) $ (0.20 ) $ (0.61 ) $ (0.76 )
Diluted net loss per share (0.16 ) (0.20 ) (0.61 ) (0.76 )

The pro forma numbers above are derived from historical numbers of the Company and vivoPharm. Over time the operations of vivoPharm will be integrated into the operations of the Company. At the current time, we do not have enough information to prepare a reliable estimate of any possible changes.

The results of operations for the three and nine months ended September 30, 2017 include the operations of vivoPharm from August 15, 2017, which accounted for approximately $794,000 of the Company’s consolidatedis still providing Discovery Services ~~revenue.~~

~~The net income~~and has yet to experience a slowdown in its project work; however, the future of ~~vivoPharm that is included in the Company’s results of operations for the three and nine months ended September 30, 2017 was approximately $380,000.~~

~~Recent Accounting Pronouncements~~

In May 2014, the Financial Accounting Standards Board (“FASB��) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), requiring an entity to recognize the amount of revenue to which it expects tomany projects may be entitled for the transfer of promised goods or services to customers. As issued and amended, ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative effect transition method. The updated standard becomes effective for the Company in the first quarter of fiscal year 2018. Early adoption is permitted in the first quarter of fiscal year 2017.delayed. The Company ~~believes~~continues to vigilantly monitor the situation with its ~~Biopharma Service~~primary focus on the health and ~~Discovery Service revenues will be affected by the new standard. The Company is presently evaluating all~~safety of its ~~contracts for performance obligations~~employees and variable consideration provisions that may affect the timing of revenue recognition subsequent to ASU 2014-09’s adoption. The Company expects to adopt the new standard on January 1, 2018, using the modified retrospective approach, which involves applying the new standard to all contracts initiated on or after the effective date and recording an adjustment to opening equity for pre-existing contracts that have remaining obligations as of the effective date.

~~Note 2. Revenue and Accounts Receivable~~

~~Revenue by service type for the three and nine months ended September 30, 2017 and 2016 is comprised of the following (in thousands):~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Biopharma Services $ 4,168
$ 3,805
11,175
$ 11,374
Clinical Services 2,880
2,687
8,887
7,685
Discovery Services 980
258
1,536
760
$ 8,028
$ 6,750
$ 21,598
$ 19,819

~~Accounts receivable by service type at September 30, 2017 and December 31, 2016 consists of the following (in thousands):~~

September 30,
2017 December 31,
2016
Biopharma Services $ 3,702
$ 3,683
Clinical Services 13,072
8,972
Discovery Services 1,300
480
Allowance for doubtful accounts (2,277 ) (1,387 )

$ 15,797
$ 11,748

Allowance for Doubtful Accounts (in thousands)
Balance, December 31, 2016 $ 1,387
Bad debt expense 890
Balance, September 30, 2017 $ 2,277

Revenue for Biopharma Services are customized solutions for patient stratification and treatment selection through an extensive suite of DNA-based testing services. Clinical Services are tests performed to provide information on diagnosis, prognosis and theranosis of cancers to guide patient management. These tests can be billed to Medicare, another third party insurer or the referring community hospital or other healthcare facility. 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:

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Medicare 11% 14% 14% 13%
Other insurers 19% 21% 22% 20%
Other healthcare facilities 6% 5% 5% 6%
36% 40% 41% 39%

We have historically derived a significant portion of our revenue from a limited number of test ordering sites, although the test ordering sites that generate a significant portion of our revenue have changed from period to period. Test ordering sites account for all of our Clinical Services along with a portion of the Biopharma 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.

The top five test ordering sites during the three months ended September 30, 2017 and 2016 accounted for approximately 45% and 39% of our testing volumes, respectively. During the three months ended September 30, 2017, there was one biopharmaceutical company which accounted for approximately 11% of our total revenue. During the three months ended September 30, 2016, there was one biopharmaceutical company which accounted for approximately 18% of our total revenue.

The top five test ordering sites during the nine months ended September 30, 2017 and 2016 accounted for approximately 40% and 31% of our testing volumes, respectively. During the nine months ended September 30, 2017, there was one biopharmaceutical company which accounted for approximately 11% of our total revenue. During the nine months ended September 30, 2016, there was one biopharmaceutical company which accounted for approximately 10% of our total revenue.clients.

Note 3. ~~Common Stock Purchase Agreement with Aspire Capital~~

On August 14, 2017, we entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Aspire Capital Fund, LLC, an Illinois limited liability company (“Aspire Capital”), which provides that Aspire Capital is committed to purchase up to an aggregate of $16.0 million of our common stock (the “Purchase Shares”) from time to time over the term of the Purchase Agreement. Aspire Capital made an initial purchase of 1,000,000 Purchase Shares (the “Initial Purchase”) at a purchase price of $3.00 per share on the commencement date of the agreement.

After the commencement date, on any business day over the 24-month term of the Purchase Agreement, we have the right, in our sole discretion, to present Aspire Capital with a purchase notice (each, a “Purchase Notice”) directing Aspire Capital to purchase up to 33,333 Purchase Shares per business day, provided that Aspire Capital will not be required to buy Purchase Shares pursuant to a Purchase Notice that was received by Aspire Capital on any business day on which the last closing trade price of our common stock on the NASDAQ Capital Market is below $3.00. The Company and Aspire Capital also may mutually agree to increase the number of shares that may be sold to as much as an additional 2,000,000 Purchase Shares per business day. The purchase price per Purchase Share will be $3.00. As consideration for entering into the Purchase Agreement, we issued 320,000 shares of our common stock to Aspire Capital (“Commitment Shares”).

The number of Purchase Shares covered by and timing of each Purchase Notice are determined by us, at our sole discretion. The aggregate number of shares that we can sell to Aspire Capital under the Purchase Agreement may in no case exceed 3,938,213 shares of our common stock (which is equal to approximately 19.9% of the common stock outstanding on the date of the Purchase Agreement), including the 320,000 Commitment Shares and the 1,000,000 Initial Purchase Shares, unless shareholder approval is obtained to issue additional shares.

Our net proceeds will depend on several factors, including the frequency of our sales of Purchase Shares to Aspire Capital and the frequency at which the last closing trade price of our common stock is below $3.00, subject to a maximum of $16.0 million in gross proceeds, including the Initial Purchase. Our delivery of Purchase Notices will be made subject to market conditions, in light of our capital needs from time to time and under the limitations contained in the Purchase Agreement. We currently intend to use the net proceeds from sales of Purchase Shares for general corporate purposes and working capital requirements.Discontinuing Operations

As ~~of September 30, 2017,~~described in Note 1, the Company ~~has~~ sold ~~1,000,000 shares under this agreement at $3.00 per share, resulting~~its BioPharma Business and Clinical Business in ~~proceeds of approximately $2,965,000, net of offering costs of approximately $35,000.~~July 2019. In conjunction with the BioPharma Disposal, the Company repaid its debt to SVB and PFG. The Company ~~has also issued 320,000 shares as consideration for entering into~~elected to allocate approximately $786 thousand of interest expense from the ~~Purchase Agreement. The Company has not deferred any offering costs~~Convertible Note and Advance from NDX to discontinuing operations during the three months ended March 31, 2019. Revenue and other significant accounting policies associated with ~~this~~the discontinuing operations have not changed since the most recently filed audited financial statements as of and for the year ended December 31, 2019.

~~agreement.~~Summarized results of the Company's unaudited condensed consolidated discontinuing operations are as follows for the three months ended March 31, 2020 and 2019 (in thousands):



	Three Months Ended March 31,
	2020			2019
Revenue	$	—		$	5,017
Cost of revenues	—			3,635
Gross profit	—			1,382
Operating expenses:
Research and development	—			454
General and administrative	(8		)	1,527
Sales and marketing	—			923
Transaction costs	—			249
Total operating expenses	(8		)	3,153
Income (loss) from discontinuing operations	8			(1,771		)
Other income (expense):
Interest expense	—			(1,110		)
Total other income (expense)	—			(1,110		)
Net income (loss) from discontinuing operations	$	8		$	(2,881	)

Unaudited condensed consolidated carrying amounts of major classes of assets and liabilities from discontinuing operations were as follows as of March 31, 2020 and December 31, 2019 (in thousands):



	March 31, 2020		December 31, 2019
Current assets of discontinuing operations:
Accounts receivable, net of allowance for doubtful accounts of $4,518 in 2020; $4,536 in 2019	$	—	$	71
Current assets of discontinuing operations	$	—	$	71

Current liabilities of discontinuing operations
Accounts payable and accrued expenses	$	764	$	1,137
Due to Interpace Biosciences, Inc.	97		92
Current liabilities of discontinuing operations	$	861	$	1,229



	Three Months Ended March 31,
	2020			2019
Income (loss) from discontinuing operations	$	8		$	(2,881	)

Adjustments to reconcile income (loss) from discontinuing operations to net cash used in operating activities, discontinuing operations
Depreciation	—			256
Amortization	—			6
Provision for bad debts	(18		)	—
Accounts payable settlements	(26		)	—
Stock-based compensation	—			39
Amortization of operating lease right-of-use assets	—			94
Amortization of discount of debt and debt issuance costs	—			593
Interest added to Convertible Note	—			113
Change in working capital components:
Accounts receivable	89			(151		)
Other current assets	—			(272		)
Other non-current assets	—			(1		)
Accounts payable, accrued expenses and deferred revenue	(347		)	(942		)
Obligations under operating leases	—			(31		)
Deferred rent payable and other	—			(151		)
Due to Interpace Biosciences, Inc.	5			—
Net cash used in operating activities, discontinuing operations	$	(289	)	$	(3,328	)

Note 4. Revenue

The Company has remaining performance obligations as of March 31, 2020 and December 31, 2019 of $1.1 million and $1.2 million, respectively. Deferred revenue of $690 thousand from December 31, 2019 was recognized as revenue in the three months ended March 31, 2020. Remaining performance obligations as of March 31, 2020 of approximately $510 thousand are expected to be recognized as revenue in the next twelve months.

During the three months ended March 31, 2020, two customers accounted for approximately 56% of the Company's consolidated revenue from continuing operations. During the three months ended March 31, 2019, three customers accounted for approximately 55% of the Company's consolidated revenue from continuing operations.

During the three months ended March 31, 2020 and 2019, approximately 13% and 33%, respectively, of the Company's continuing operations revenue was earned outside the United States and collected in local currency.

Note 4.5. 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.

~~Basic net loss and diluted net loss per share data~~ For all periods presented, all common stock equivalents outstanding were ~~computed as follows (in thousands except per share data):~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Numerator:
Net (loss) for basic earnings per share $ (633 ) $ (3,745 ) $ (12,979 ) $ (13,027 )
Change in fair value of warrant liability 2,790
—
—
—
Net (loss) for diluted earnings per share $ (3,423 ) $ (3,745 ) $ (12,979 ) $ (13,027 )
Denominator:
Weighted-average basic common shares outstanding 21,577
16,519
20,059
14,868
Assumed conversion of dilutive securities:
Common stock purchase warrants 782
—
—
—
Potentially dilutive common shares 782
—
—
—
Denominator for diluted earnings per share – adjusted weighted-average shares 22,359
16,519
20,059
14,868
Basic net (loss) per share $ (0.03 ) $ (0.23 ) $ (0.65 ) $ (0.88 )
Diluted net (loss) per share $ (0.15 ) $ (0.23 ) $ (0.65 ) $ (0.88 )

The above table includes adjustments to diluted earnings per share in accordance with FASB Accounting Standards Codification (“ASC”) 260. The adjustments were required for the three months ended September 30, 2017 as the derivative warrants were dilutive and the change in fair value of the derivative warrants was a gain.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):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Common stock purchase warrants 4,163
7,145
6,574
7,145
Stock options 2,816
2,128
2,816
2,128
Restricted shares of common stock 115
73
115
73
7,094
9,346
9,505
9,346

~~Note 5. Sale of Net Operating Losses~~

On February 22, 2017, we sold $18,177,059 of gross State of New Jersey NOL’s relating to the 2014 and 2015 tax years for approximately $876,000 as well as $167,572 of state research and development tax credits. The sale resulted in the net receipt by the Company of approximately $970,000. This figure includes all costs and expenses associated with the sale of these state tax attributes as deducted from the gross sales price of $1,043,517.



	Three Months Ended March 31,
	2020	2019
Common stock purchase warrants	279	402
Stock options	73	76
Convertible Note	—	126
Advance from NDX	—	90
Restricted shares of common stock	—	1
	352	695

Note 6. ~~Term Notes~~Leasing Arrangements

Operating Leases

The Company leases its laboratory, research facility and ~~Line~~administrative office space under various operating leases. The Company also leases scientific equipment under various finance leases. Following the Business Disposals, the Company has assigned its office leases in North Carolina and New Jersey to Buyer.

The Company determines 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 its unaudited condensed consolidated balance sheets. Finance leases are included in fixed assets, net of ~~Credit~~accumulated depreciation and obligations under finance leases.

ROU assets represent the Company's right to use an underlying asset for the lease term and lease obligations represent the Company's obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease obligations are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company's incremental borrowing rate was determined by adjusting its secured borrowing interest rate for the longer-term nature of its leases. The Company's variable lease payments primarily consist of maintenance and other operating expenses from its 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. The operating lease ROU asset also includes any lease payments made and excludes lease incentives incurred. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components. The Company has elected to account for these lease and non-lease components as a single lease component. The Company is 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 operating and finance lease expense were as follows for the three months ended March 31, 2020 and 2019, respectively, for continuing operations (in thousands):



	Three months ended March 31, 2020		Three months ended March 31, 2019
Finance lease cost:
Amortization of right-of use assets	$	21	$	10
Interest on lease liabilities	3		1
Operating lease cost	56		44
Short-term lease cost	28		30
Variable lease cost	15		24
	$	123	$	109

Supplemental cash flow related to leases of the Company's continuing operations was as follows for the three months ended March 31, 2020 and March 31, 2019 (in thousands):



	Three months ended March 31, 2020		Three months ended March 31, 2019
Cash paid amounts included in the measurement of lease liabilities:
Operating cash flows used for operating leases	$	56	$	44

Other supplemental information related to leases of the Company's continuing operations was as follows at March 31, 2020 and 2019, respectively:



	Three months ended March 31, 2020		Three months ended March 31, 2019
Weighted average remaining lease term (in years)
Operating leases	0.63		1.73
Finance leases	3.13		1.89

Weighted average discount rate
Operating leases	7.99	%	7.96	%
Finance leases	8.24	%	10.28	%

At March 31, 2020, future estimated minimum lease payments under non-cancelable operating leases were as follows (in thousands):



	Finance Leases		Operating Leases		Total
2020 (remaining 9 months)	$	60	$	158	$	218
2021	39		20		59
2022	31		11		42
2023	31		2		33
2024	7		—		7
Total minimum lease payments	$	168	191		359
Less amount representing interest	21		17		38
Present value of net minimum obligations	147		174		321
Less current obligation under finance and operating leases	66		153		219
Long-term obligation under finance and operating leases	$	81	$	21	$	102

Note 7. Financing

Advance from NDX

On ~~March 22, 2017, we refinanced our debt~~September 18, 2018, the Company entered into the Merger Agreement with ~~Silicon Valley Bank (“SVB”), by repaying~~NDX. In connection with signing the ~~outstanding term loan (“SVB Term Note”), which was scheduled to mature in April~~Merger Agreement, NDX loaned the Company $1.5 million. On October 21, 2019, the Company and NDX entered into a ~~new two year asset-based revolving line~~settlement agreement (“NDX Settlement Agreement”). The NDX Settlement Agreement required the Company to pay $100 thousand on the date of execution and $1.0 million upon receipt of proceeds from the Excess Consideration Note. The $1.0 million payment was made in October 2019. As a result of such payment, pursuant to the NDX Settlement Agreement, the balance of the Advance from NDX was reduced to $450 thousand and each party released the other from all claims under the original credit agreement and the Merger Agreement. The remaining amount due is to be paid in nine monthly payments of $50 thousand commencing in November 2019. If the Company fails to make any of the required monthly payments, NDX may convert all, but not less than all, of the amounts then owing into a number of shares of the Company’s common stock at a conversion price of $4.50 per share. The NDX

~~credit agreement. The new SVB credit facility provides for an asset-based line of credit (“ABL”) for an amount not to exceed~~Settlement Agreement adjusted the ~~lesser of (a) $6.0 million or (b) 80% of eligible accounts receivable plus the lesser of 50%~~interest rate of the ~~net collectible value~~obligation to 0%. At March 31, 2020, the principal balance 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 requires monthly interest payments at the Wall Street Journal prime rate plus 1.50% (5.75% at September 30, 2017) and matures onAdvance from NDX was $200 thousand. Subsequent to March ~~22, 2019. We~~31, 2020, an additional $150 thousand was paid ~~to SVB a $30,000 commitment fee at closing and will pay a fee of 0.25% per year~~ on the ~~average unused~~Advance from NDX.

Atlas Sciences Note

In October 2019, the Company entered into a twelve month unsecured promissory note with Atlas Sciences, LLC ("Atlas Sciences") of $1.3 million (the "Atlas Sciences Note"). The Atlas Sciences Note resulted in cash receipts of $1.3 million, reflecting an original issue discount of $88 thousand and expenses payable by the Company of $10 thousand. The Atlas Sciences Note has a 12-month term and bears interest at 10% per annum. Atlas Sciences may redeem any portion of the ~~ABL. At September 30, 2017, we have borrowed $2.0 million~~ onnote, at any time after six months from the ~~ABL.~~

~~We concurrently entered into~~issuance date upon three business days' notice, subject to a ~~new three year $6.0 million term loan agreement (“PFG Term Note”) with Partners for Growth IV, L.P. (“PFG”).~~monthly maximum redemption amount of $300 thousand. 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, with the possibility of reducing to 11.0% in 2018 based on achieving certain financial milestones set forth by PFG. WeCompany may prepay the ~~PFG Term~~Atlas Sciences Note ~~in whole or part~~ at any time without penalty. ~~We paid PFG a commitment fee~~Upon the occurrence of ~~$120,000~~ ~~at closing.~~

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 new loan agreements may be accelerated if an event of default, ~~occurs,~~the interest rate will be adjusted to 22% per annum. At March 31, 2020, the Atlas Sciences Note had a principal balance of $1.3 million, which ~~includes, among other things, a violation~~is presented net of ~~such financial covenants~~discounts and ~~negative covenants.~~

~~Our obligations to SVB under the ABL facility are secured by a first priority security interest on substantially all~~unamortized debt issuance costs of ~~our assets,~~$31 thousand and ~~our obligations under the PFG Term~~$3 thousand, respectively. See Note ~~are secured by a second priority security interest subordinated to the SVB lien.~~

~~In connection~~15 for transactions with the PFG Term Note, we issued seven year warrants to the lenders to purchase an aggregate of 443,262 shares of our common stock at an exercise price of $2.82 per share. The number of warrants may be reduced by 20% subject to us achieving certain financial milestones set forth by PFG.

~~The following is a summary of long-term debt (in thousands):~~

September 30, 2017 December 31, 2016
SVB Term Note, repaid in 2017 $ —
$ 4,667
PFG Term Note, net of discount of $865 5,135
—
Less unamortized debt issuance costs 199
13
Term notes, net 4,936
4,654
Less current maturities —
2,000
Long-term portion $ 4,936
$ 2,654

~~At September 30, 2017, the principal amount of the PFG Term Note of $6,000,000 is due in~~Atlas after March 31, 2020.

Note 7.8. Stock-Based Compensation

~~We have~~The Company has 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~~the Company's 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 ~~September 30, 2017, 391,317~~March 31, 2020, 24 thousand shares remain available for future awards under the 2011 ~~Plan~~Plan. On January 2, 2020, the Company granted 20 thousand options to key employees. The options will vest in equal monthly installments over the next twelve months and ~~134,354 shares remain available for future awards under the 2008 Plan.~~have an exercise price of $5.53 per share.

A summary of employee and non-employee stock option activity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 for both continuing and discontinuing employees 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, 2017 2,198
$ 9.09
7.04 $ —
Granted 860
2.87

Exercised (3 ) 2.23

Cancelled or expired (239 ) 10.80

Outstanding September 30, 2017 2,816
$ 7.05
7.19 $ 367
Exercisable September 30, 2017 1,533
$ 9.54
5.69 $ 76



	Options Outstanding				Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
	Number of Shares (in thousands)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding January 1, 2020	64		$	113.63	7.48	$	24
Granted	20		5.53
Cancelled or expired	(11	)	87.11
Outstanding March 31, 2020	73		$	88.15	7.93	$	—
Exercisable March 31, 2020	43		$	140.57	7.01	$	—

Aggregate intrinsic value represents the difference between the fair value of ~~our~~the Company's common stock and the exercise price of outstanding, in-the-money options. ~~During the three and nine months ended September 30, 2017, the Company received approximately $2,500 and $6,500, respectively, from the exercise of options.~~

As of ~~September 30, 2017,~~March 31, 2020, total unrecognized compensation cost related to non-vested stock options granted to employees was ~~$2,865,963~~approximately $207 thousand for continuing operations, which wethe Company expect to recognize over the next ~~2.32~~1.72 years.

As of September 30, 2017, total unrecognized compensation cost related to non-vested stock options granted to non-employees was $12,625 which we expect to recognize over the next 0.25 years. The estimate of unrecognized non-employee compensation is based on the fair value of the non-vested options as of September 30, 2017.

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 usthe Company 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~~the Company's common stock, a risk-free interest rate, and expected dividends. ~~To the extent actual forfeitures differ from the estimates, the difference~~Forfeitures will be recorded ~~as a cumulative adjustment in the period estimates are revised.~~when they occur. No compensation cost is recorded for options that do not vest. ~~We use~~Due to significant changes in the Company's business, the Company used 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~~the Company's 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. WeThe Company use an expected dividend yield of zero, as ~~we do~~it does not anticipate paying any dividends in the foreseeable future. ~~Forfeitures will be recorded when they occur.~~

The following table presents the weighted-average assumptions used to estimate the fair value of options granted to continuing and discontinuing employees ~~during the periods presented:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Volatility 75.28 % 74.30 % 74.60 % 74.30 %
Risk free interest rate 1.92 % 1.17 % 1.97 % 1.17 %
Dividend yield 0.00 % 0.00 % 0.00 % 0.00 %
Term (years) 5.73
5.92
5.90
5.92
Weighted-average fair value of options granted during the period 1.91
1.30
1.89
1.30

In May 2014, we issued 200,000 options to our Director, Raju Chaganti, with an exercise price of $15.89. See Note 12 for additional information. The following table presents the weighted-average assumptions used to estimate the fair value of options reaching their measurement date for non-employees during the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2020			2019
Volatility	74.39	%	72.97	%	76.06	%	74.50	%	110.43		%	90.15		%
Risk free interest rate	2.17	%	1.46	%	2.19	%	1.43	%	1.68		%	2.54		%
Dividend yield	0.00	%	0.00	%	0.00	%	0.00	%	0.00		%	0.00		%
Term (years)	6.64		7.64		6.89		7.89		5.27			6.32
Weighted-average fair value of options granted during the period									$	4.45		$	10.07

Restricted stock awards have been granted to employees, directors and consultants as compensation for services. At ~~September 30, 2017,~~March 31, 2020, there was ~~$383,829 of~~no unrecognized compensation cost related to non-vested restricted stock granted to employees and ~~directors; we expect to recognize the cost over 1.50 years.~~directors.

The ~~following table summarizes~~TSA with Buyer described in Note 1 requires the ~~activities for our non-vested restricted stock awards for~~Company to continue to employ individuals who will transfer to Buyer no later than six months from the ~~nine months ended September 30, 2017:~~

Non-vested Restricted Stock Awards
Number of
Shares
(in thousands) Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2017 80
$ 6.30
Granted 65
3.29
Vested (30 ) 8.30
Non-vested at September 30, 2017 115
$ 4.09

closing of the transaction. Stock-based compensation related to these employees is included in discontinuing operations. 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~~the Company's continuing operations included in its Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss) during the periods presented (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Cost of revenues $ 122
$ 83
$ 250
$ 219
Research and development 11
45
110
140
General and administrative 356
356
949
1,095
Sales and marketing 30
30
86
84
Total stock-based compensation $ 519
$ 514
$ 1,395
$ 1,538



	Three Months Ended March 31,
	2020		2019
Cost of revenues	$	4	$	4
General and administrative	54		115
Total stock-based compensation related to continuing operations	$	58	$	119

During the three months ended March 31, 2020 and 2019, the Company recognized approximately $0 thousand and $39 thousand, respectively, of stock-based compensation (benefit) related to discontinuing operations.

Note 8.9. Warrants

~~On March 22, 2017, we issued seven~~ year warrants to PFG and certain of its affiliates to purchase an aggregate of 443,262 shares of our common stock at an exercise price of $2.82 per share, in conjunction with our debt refinancing described in Note 5. The number of warrants may be reduced by 20% subject to us achieving certain financial milestones set forth by PFG. The warrants can be net settled in common stock using the average 90-trading day price of our common stock. These warrants are defined in the table below as 2017 Debt derivative warrants.

During the three and nine months ended September 30, 2017, the Company received approximately $56,000 and $1,827,000, respectively, from shareholders who exercised warrants to purchase 25,000 and 811,900 shares of common stock, respectively, at $2.25. In addition, on March 28, 2017, warrant holders exercised warrants to purchase 90,063 shares of common stock at an exercise price of $2.25 per share using the net issuance exercise method whereby 45,162 shares were surrendered as payment in full of the exercise price resulting in a net issuance of 44,901 shares.

The following table summarizes the warrant activity for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 (in thousands, except exercise price):


Issued With / For	Exercise Price			Warrants Outstanding January 1, 2017	2017 Warrants Issued	2017 Warrants Exercised		Warrants Outstanding September 30, 2017	Exercise Price			Warrants Outstanding January 1, 2020	2020 Warrants Issued	2020 Warrants Expired	Warrants Outstanding March 31, 2020
Non-Derivative Warrants:
Financing	$	10.00		243	—	—		243	$	300.00		8	—	—	8
Financing	15.00			361	—	—		361	450.00			9	—	—	9
Debt guarantee	15.00			109	—	—		109
2015 Offering	5.00			3,450	—	—		3,450	150.00			115	—	—	115
2017 Debt									27.60			15	—	—	15
2019 Offering									7.43			31	—	—	31
2019 Offering									7.59			35	—	—	35
Total non-derivative warrants	6.42		C	4,163	—	—		4,163	115.54		B	213	—	—	213
Derivative Warrants:
2016 Offerings	2.25		A	2,870	—	(902	)	1,968	67.50		A	66	—	—	66
2017 Debt	2.82		B	—	443	—		443
Total derivative warrants	2.35		C	2,870	443	(902	)	2,411	67.50		B	66	—	—	66
Total	$	4.93	C	7,033	443	(902	)	6,574	$	104.18	B	279	—	—	279


A	These warrants are subject to fair value accounting and contain a contingent net cash settlement feature. See Note 10.


B	These warrants are subject to fair value accounting and contain a net settlement provision that uses the 90-trading day price of our common stock. These warrants are subject to a 20% reduction if certain financial milestones are met.


C	Weighted-average exercise prices are as of ~~September 30, 2017.~~March 31, 2020.

Note 9.10. Fair Value of Warrants

The following table summarizes the derivative warrant activity subject to fair value accounting for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 (in thousands):


Issued with/for	Fair value of warrants outstanding as of December 31, 2016		Fair value of warrants issued		Fair value of warrants exercised			Change in fair value of warrants			Fair value of warrants outstanding as of September 30, 2017		Fair value of warrants outstanding as of December 31, 2019		Change in fair value of warrants			Fair value of warrants outstanding as of March 31, 2020
2016 Offerings	$	2,018	$	—	$	(2,782	)	$	4,107		$	3,343	$	178	$	(127	)	$	51
2017 Debt	—		1,004		—			(180		)	824
	$	2,018	$	1,004	$	(2,782	)	$	3,927		$	4,167

The derivative warrants issued as part of the 2016 Offerings are valued using a probability-weighted Binomial ~~model, while the derivative warrants issued as part of the 2017 Debt refinancing are valued using a Monte Carlo~~ model. The following tables summarize the assumptions used in computing the fair value of derivative warrants subject to fair value accounting at ~~the date of issue or exercise during the three and nine months ended September 30, 2017 and 2016, and at September 30, 2017~~March 31, 2020 and December 31, ~~2016.~~2019.


	Issued During the						Exercised During the
2016 Offerings	Three Months Ended September 30, 2016			Nine Months Ended September 30, 2016			Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017			As of September 30, 2017			As of December 31, 2016			As of March 31, 2020			As of December 31, 2019
Exercise price	$	2.25		$	2.25		$	2.25		$	2.25		$	2.25		$	2.25		$	67.50		$	67.50
Expected life (years)	5.50			5.50			4.30			4.78			4.33			5.06			1.83			2.08
Expected volatility	73.28		%	74.36		%	74.20		%	76.24		%	75.07		%	72.82		%	157.00		%	150.69		%
Risk-free interest rate	1.21		%	1.30		%	1.81		%	1.94		%	1.92		%	1.93		%	0.23		%	1.58		%
Expected dividend yield	—		%	—		%	—		%	—		%	—		%	—		%	—		%	—		%

2017 Debt Issued During the Nine Months Ended September 30, 2017 As of September 30, 2017
Exercise price $ 2.82
$ 2.82
Expected life (years) 7.00
6.48
Expected volatility 74.61 % 74.07 %
Risk-free interest rate 2.22 % 2.16 %
Expected dividend yield — % — %

Note ~~10.~~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~~Accounting Standards Codification 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~~the Company's 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 Company has 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~~the Company's own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The following table summarizes the financial assets and 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):

September 30, 2017
Total Quoted Prices in
Active Markets for
Identical Assets
(Level 1) Significant Other
Observable
Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Warrant liability $ 4,167
$ —
$ —
$ 4,167
Note payable 228
—
—
228
$ 4,395
$ —
$ —
$ 4,395


	December 31, 2016								March 31, 2020
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Warrant liability	$	2,018	$	—	$	—	$	2,018
Note payable	114		—		—		114
Assets:
Earn-Out from siParadigm									$	973	$	—	$	—	$	973
	$	2,132	$	—	$	—	$	2,132	$	973	$	—	$	—	$	973

Liabilities:
Warrant liability									$	51	$	—	$	—	$	51
									$	51	$	—	$	—	$	51

~~The ultimate payment~~



	December 31, 2019
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Earn-Out from siParadigm	$	1,103	$	—	$	—	$	1,103
	$	1,103	$	—	$	—	$	1,103

Liabilities:
Warrant liability	$	178	$	—	$	—	$	178
Notes payable	16		—		—		16
	$	194	$	—	$	—	$	194

At December 31, 2019, the Company had a liability payable to VenturEast ~~will be~~from a prior acquisition. The liability to VenturEast was settled during the ~~value of 84,278~~three months ended March 31, 2020 with 3 thousand shares of common stock at ~~the time of payment. The~~a value of $4.20 per common share and following two payments of $50 thousand. The cash payments were recorded in general and administrative expense on the ~~note payable to VenturEast was determined using the fair value~~consolidated statement of ~~our common stock.~~operations and other comprehensive income (loss). During the three months ended

~~September 30, 2017~~ March 31, 2020 and ~~2016, we~~2019, the Company recognized a gain of approximately ~~$105,000~~$4 thousand and $18,000, respectively, due to the change in value of the note. During the nine months ended September 30, 2017 and 2016, we recognized a loss of approximately $114,000 and a gain of approximately $119,000,$0 thousand, respectively, due to the change in value of the note.

At ~~September 30, 2017,~~March 31, 2020, the warrant liability consists of stock warrants issued as part of the 2016 Offerings that contain contingent ~~redemption features and warrants issued as part of the debt refinancing outlined in Note 6.~~net settlement features. In accordance with derivative accounting for warrants, wethe Company calculated the fair value of ~~these~~ warrants and the assumptions used are described in Note 9,10, “Fair Value of Warrants.” During the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, we~~2019, the Company recognized gains (losses) of approximately ~~$2,790,000~~$127 thousand and ~~$712,000,~~$7 thousand, respectively, on the derivative warrants due to the decrease in ~~our~~its stock price. ~~During~~

At March 31, 2020, the ~~nine months ended September 30, 2017, we recognized a loss~~Company had an earn-out receivable from siParadigm that is based on tests performed by siParadigm for the Company's former Clinical Business customers between July 5, 2019 and July 4, 2020, as discussed in Note 1. The value of ~~approximately $3,927,000~~the earn-out is based on actual tests performed through March 31, 2020 and the ~~derivative warrants due~~Company's estimate of tests to ~~changes in our stock price. During~~be performed through the ~~nine months ended September 30, 2016, we recorded a gain~~remainder of ~~approximately $712,000 on~~ the derivative warrants due to changes in our stock price. During the nine months ended September 30, 2016, we also recorded a gain of approximately $17,000 due to the expiration of derivative warrants outstanding at December 31, 2015.earn-out period.

Realized and unrealized gains and losses related to the change in fair value of the VenturEast note, ~~and~~ warrant liability and other derivatives are included in other income (expense) on the Unaudited Condensed Consolidated Statements of ~~Operations.~~Operations and Other Comprehensive Income (Loss).

The following table summarizes the activity of the note payable to VenturEast and of ~~our~~the Company's derivative warrants and other derivatives, which ~~was~~were measured at fair value using Level 3 inputs (in thousands):

Note Payable Warrant
to VenturEast Liability
Fair value at December 31, 2016 $ 114
$ 2,018
Fair value of warrants issued —
1,004
Fair value of warrants exercised —
(2,782 )
Change in fair value 114
3,927
Fair value at September 30, 2017 $ 228
$ 4,167



	Assets			Liabilities
	Earn-Out
	from			Note Payable			Warrant
	siParadigm			to VenturEast			Liability
Fair value at January 1, 2020	$	1,103		$	16		$	178
Receipts received during period	(154		)	—			—
Change in fair value	24			(4		)	(127		)
Settlement of liability	—			(12		)	—
Fair value at March 31, 2020	$	973		$	12		$	51

Note ~~11.~~12. Joint Venture Agreement

In November 2011, wethe Company entered into an affiliation agreement with the Mayo Foundation for Medical Education and Research (“Mayo”), subsequently amended. Under the agreement, wethe Company 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 usthe Company 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~~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.

~~Our share of the JV’s net loss was approximately $2,000 and $18,000 for~~During the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, and approximately $21,000 and $45,000 for~~2019, there was no activity in the ~~nine months ended September 30, 2017 and 2016, respectively, and is included in research and development expense on the Consolidated Statements of Operations. We have~~JV. The Company has a net receivable due from the JV of approximately ~~$10,000~~$10 thousand at ~~September 30, 2017,~~March 31, 2020, which is included in other assets in the Unaudited Condensed Consolidated Balance Sheets.

The ~~joint venture is considered a variable interest entity under ASC 810-10, but we are not~~JV was dissolved effective February 14, 2020, and the ~~primary beneficiary as we do not have the power to direct the activities of~~dissolution terms include an estimated final cash distribution from the JV ~~that most significantly impact its performance. Our evaluation~~to the Company of ~~ability~~approximately $$92 thousand, to ~~impact performance~~be paid as soon as practicable. The Company received the first payment of $36 thousand in April 2020, which is ~~based on our equal board membership and voting rights and day-to-day management functions which are performed by~~consistent with the ~~Mayo personnel.~~dissolution terms.

Note ~~12.~~13. Related Party Transactions

~~We have a consulting agreement with Equity Dynamics, Inc. (“EDI”), an entity controlled by~~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, ~~effective April 1, 2014 pursuant to which EDI receives~~who was then a ~~monthly fee of $10,000. Total expenses for each of~~Director, John Roberts, the ~~three months ended September 30, 2017~~Company's President and ~~2016 were $30,000. Total expenses for each of~~Chief Executive Officer, and Geoffrey Harris, a Director, purchased 33 thousand shares, 3 thousand shares and 3 thousand shares, respectively, at the ~~nine months ended September 30, 2017 and 2016 were $90,000. As of September 30, 2017, we owed EDI $20,000.~~

In 2010, we entered into a three-year consulting agreement with Dr. Chaganti, which was subsequently renewed through December 31, 2016 pursuant to which Dr. Chaganti received $5,000 per month for providing consulting and technical support services. Pursuant to the terms of the renewed consulting agreement, Dr. Chaganti received an option to purchase 200,000 shares of our common stock at a purchasepublic offering price of ~~$15.89~~$6.75 per ~~share vesting over~~share. On January 31, 2019, John Pappajohn, John Roberts, Edmund Cannon, a ~~period~~Director, and M. Glenn Miles, the Company's Chief Financial Officer, purchased 33 thousand shares, 6 thousand shares, 1 thousand shares and 5 thousand shares, respectively, at the public offering price of four years. Total non-cash stock-based compensation recognized under the consulting agreement for the three months ended September 30, 2017 and 2016 was $12,625 and $7,125, respectively. Total non-cash stock-based compensation recognized under the consulting agreement for the nine months ended September 30, 2017 and 2016 was $62,125 and $32,750, respectively. Also pursuant to the consulting agreement, Dr. Chaganti assigned to us all rights to any inventions which he may invent during the course of rendering consulting services to us. In exchange for this assignment, if the USPTO issues a patent for an invention on which Dr. Chaganti is listed as an inventor, we are required to pay Dr. Chaganti (i) a one-time payment of $50,000 and (ii) 1% of any net revenues we receive from any licensed sales of the invention. In the first quarter of 2016, we paid Dr. Chaganti $50,000 which was recognized as an expense in fiscal 2015 when one patent was issued.$6.90 per share.

Note ~~13.~~14. Contingencies

~~In the normal course~~On April 5, 2018 and April 12, 2018, purported stockholders of ~~business,~~ the Company ~~may become involved~~filed nearly identical putative class action lawsuits in ~~various~~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 the Company's business, operational, and financial results. The lawsuits sought, among other things, unspecified compensatory damages in connection with purchases of the Company's 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 Court granted the defendants’ motion to dismiss during the oral

argument and on February 25, 2020, the Court issued a written order dismissing the case with prejudice. The Lead Plaintiff has not appealed the dismissal.

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. On May 15, 2020, the plaintiffs in the Workman action filed a notice of voluntary dismissal to the original action and have formally withdrawn. On May 18, 2020, the plaintiffs in the McNeece action filed a notice of voluntary dismissal to the original action and have formally withdrawn. On June 22, 2020, the plaintiffs in the Bell action voluntarily dismissed their action. Based upon the above dismissal of the securities class action litigation, the Company believes this matter is closed. The Company is expensing legal ~~proceedings. In~~costs associated with the ~~opinion of management, the ultimate liability or disposition thereof is not expected to have a material adverse effect on our financial condition, results of operations, or liquidity.~~loss contingency as incurred.

Note 15. Subsequent Events

Between June 3, 2020 and June 9, 2020, the Company issued an aggregate of approximately 153 thousand shares of the Company’s common stock to Atlas Sciences in exchange for the return to the Company of $500 thousand of principal amount from their unsecured promissory note.

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

As used herein, the ~~“Company,” “we,” “us,” “our” or similar terms,~~“Company” refer to Cancer Genetics, Inc. and its wholly owned ~~subsidiaries:~~subsidiaries at March 31, 2020: Cancer Genetics Italia, S.r.l., Gentris, LLC, and ~~BioServe Biotechnologies (India) Private Limited,~~vivoPharm Pty, Ltd, except as expressly indicated or unless the context otherwise requires. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help facilitate an understanding of ~~our~~the Company's financial condition and ~~our~~its historical results of operations for the periods presented. This MD&A should be read in conjunction with the audited consolidated financial statements and notes thereto included in ~~our~~the Company's annual report on Form 10-K filed with the SEC on ~~March 23, 2017.~~May 29, 2020. This MD&A may contain forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” below. The share numbers in the following discussion reflect a 1-for-30 reverse stock split that the Company effected October 24, 2019.

Overview

~~We are~~Cancer Genetics, Inc. (the "Company") supports the efforts of the biotechnology and pharmaceutical industries to develop innovative new drug therapies. Until the closing of the Business Disposals (as defined below) in July 2019, the Company was an emerging leader in ~~the field of~~enabling precision medicine ~~enabling~~in oncology by providing multi-disciplinary diagnostic and data solutions, facilitating individualized therapies inthrough the ~~field of oncology through our~~Company's diagnostic ~~products and~~tests, services and molecular markers. ~~We develop, commercialize~~Following the Business Disposals, the Company currently has an extensive set of anti-tumor referenced data based on predictive xenograft and syngeneic tumor models from the acquisition of vivoPharm, Pty Ltd. (“vivoPharm”) in 2017, to provide ~~molecular-~~Discovery Services such as contract research services, focused primarily on unique specialized studies to guide drug discovery and ~~biomarker-based tests~~development programs in the oncology and services that enable physicians to personalize the clinical management of each individual patient by providing genomic information to better diagnose, monitor and inform cancer treatment and that enable biotech and pharmaceutical companies engaged in oncology trials to better select candidate populations and reduce adverse drug reactions by providing information regarding genomic factors influencing subject responses to therapeutics. We have a comprehensive, disease-focused oncology testing portfolio. Ourimmuno-oncology fields. The Company's tests and techniques target a wide range of ~~cancers,~~indications, covering ~~nine~~all ten of the top ~~ten~~ cancers in prevalence in the United States, with additional unique capabilities offered by ~~our~~its FDA-cleared Tissue of Origin® test for identifying difficult to diagnose tumor types or poorly differentiated metastatic disease.

~~Our vision~~The Company offers preclinical services such as predictive tumor models, human orthotopic xenografts and syngeneic immuno-oncology relevant tumor models in its Hershey, PA facility, and is ~~to become the oncology diagnostics partner for biopharmaceutical companies and clinicians by participating~~a leader in the ~~entire care continuum from bench~~field of immuno-oncology preclinical services in the United States. This service is supplemented with GLP toxicology and extended bioanalytical services in the Company's Australian-based facilities in Clayton, Victoria, and Gilles Plains, South Australia (effective in February 2020).

The Company utilized relatively the same proprietary and nonproprietary diagnostic tests, laboratory developed tests (LDTs) and technologies across all of its service offerings to ~~bedside. We believe the diagnostics industry is undergoing a rapid evolution in its approach~~deliver results-oriented information important to ~~oncology testing, embracing precision medicine and individualized testing as a means to drive higher standards of patient~~cancer treatment and ~~disease~~patient management. Similarly, biopharmaceutical companies are increasingly engaging companies such as ours to provide information on clinical trial participants' molecular profiles in order to identify biomarker and genomic variations that may be responsible for differing responses to pharmaceuticals, and particularly to oncology drugs, thereby increasing the efficiency of trials while lowering related costs. We believe tailored therapeutics can revolutionize oncology medicine through molecular- and biomarker-based testing services, enabling physicians and researchers to target the factors that make each patient and disease unique.

Our services are performed at our state-of-the-art laboratories located in New Jersey, Pennsylvania, North Carolina, California, Shanghai (China), Victoria (Australia), and Hyderabad (India). Our laboratories comply with the highest regulatory standards

as appropriate for the services they deliver including CLIA, CAP, NY State, California State and NABL (India). 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.

Our clinical offerings include our portfolio of proprietary tests targeting hematological, urogenital and HPV-associated cancers, in conjunction with ancillary non-proprietary tests. Our proprietary tests target cancers that are difficult to prognose and predict treatment outcomes through currently available mainstream techniques. We provide our proprietary tests and services, along with a comprehensive range of non-proprietary oncology-focused tests and laboratory services, to oncologists and pathologists at hospitals, cancer centers, and physician offices, as well as biotech and pharmaceutical companies to support their clinical trials. Our proprietary tests are based principally on our expertise in specific cancer types, test development methodologies and proprietary algorithms correlating genetic events with disease specific information. OurThe Company's portfolio primarily ~~includes~~included comparative genomic hybridization (CGH) microarrays, ~~and~~gene expression tests, next generation sequencing (NGS) panels, and DNA fluorescent in situ hybridization (FISH) probes. The Company provided testing services from its Clinical Laboratory Improvement Amendments (“CLIA”) - certified and College of American Pathologists (“CAP”) - accredited laboratories in Rutherford, NJ and Raleigh, NC.

The ~~non-proprietary testing services we offer are focused in part on specific oncology categories where we are developing our proprietary tests. We believe~~Company does not project that ~~there is significant synergy in developing and marketing a complete set of tests and services that are disease focused and delivering those tests and services in a comprehensive manner~~cash at March 31, 2020, will be sufficient to ~~help with treatment decisions.~~

The insight that we develop in delivering the non-proprietary services are often leveraged in the development of our proprietary programs and now increasingly in the validation of our proprietary programs, such as MatBA and Focus::NGS.

~~We expect to continue to incur significant losses~~fund normal operations for the ~~near future. We incurred losses of $15.8 million and $20.2 million for fiscal years ended December 31, 2016 and 2015, respectively, and $13.0 million for the nine months ended September 30, 2017.~~

~~As of September 30, 2017, we had an accumulated deficit of $126.9 million.~~

~~Acquisitions~~

On August 15, 2017, we purchased all of the outstanding stock of vivoPharm, with its principal place of business in Victoria, Australia, in a transaction valued at approximately $1.2 million in cash, $9.5 million in the Company's common stock based on the closing price of the stock on August 15, 2017, plus an estimated accrued settlement of $345,000 for excess working capital. The Company has deposited in escrow 20% of the stock consideration until the expiration of twelve months from the issuance of these financial statements in the Quarterly Report on Form 10-Q. The Company's ability to continue as a going concern is dependent on reduced losses and improved future cash flows. Alternatively, the Company may be required to raise additional equity or debt capital, or consummate other strategic transactions. These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company can provide no assurance that these actions will be successful or that additional sources of financing will be available on favorable terms, if at all. These factors raise substantial doubt about the Company's ability to continue as a going concern for the next twelve months from the issuance of this Quarterly Report on Form 10-Q.

Business Disposals - Discontinuing Operations

Interpace Diagnostics Group, Inc.

On July 15, 2019, the Company entered into a secured creditor asset purchase agreement (the “BioPharma Agreement”) by and among the Company, Gentris, LLC, a wholly owned subsidiary of the Company, Partners for Growth IV, L.P. (“PFG”), Interpace Diagnostics Group, Inc. (“IDXG”) and a newly-formed subsidiary of IDXG, Interpace BioPharma, Inc. (“Buyer”). The BioPharma Agreement provided for a consensual private foreclosure sale by PFG of all assets relating to the Company’s BioPharma Business (as defined in the BioPharma Agreement) to Buyer (the “BioPharma Disposal”). The BioPharma Disposal was consummated on July 15, 2019.

Pursuant to the BioPharma Agreement, Buyer purchased from PFG certain assets and assumed certain liabilities of the Company relating to the BioPharma Business, providing as gross consideration $23.5 million, less certain closing ~~date~~adjustments totaling $2.0 million, of which $7.7 million was paid in the form of a promissory note issued by Buyer to ~~serve~~the Company (the “Excess Consideration Note”) and the remainder was paid to PFG in cash. PFG utilized the cash proceeds to satisfy the outstanding balances of the Silicon Valley Bank (“SVB”) asset-based revolving line of credit (“ABL”) and the $6.0 million term note to PFG (“PFG Term Note”), and to satisfy certain transaction expenses. The balance of approximately $2.3 million was delivered to the Company along with the Excess Consideration Note. The Excess Consideration Note which required interest-only quarterly payments at a rate of 6% per year, matured in October 2019 and was settled on October 24, 2019 for $6.0 million, including interest of $24 thousand. The Buyer withheld from the settlement of the Excess Consideration Note approximately $775 thousand for a net worth adjustment (assets less liabilities) of the BioPharma business (“Net Worth”), $153 thousand to secure collection of certain older accounts receivable of the Company purchased by Buyer (“AR Holdback”) and an additional $735 thousand as security for indemnification obligations of the ~~initial source~~Company for any ~~indemnification claims~~breaches of certain limited warranties and ~~adjustments.~~covenants of the Company and other specified items (“Indemnification Holdback”). The Company received the full amounts of the AR Holdback and the Indemnification Holdback in April and May 2020, respectively.

~~vivoPharm is~~The Company and Buyer also entered into a ~~contract research organization (“CRO”~~transition services agreement (the “TSA”) ~~that specializes in planning~~pursuant to which the Company and ~~conducting unique, specialized studies~~Buyer are providing certain services to ~~guide drug discovery and development programs with a concentration in oncology and immuno-oncology. These studies range from early compound selection~~each other to ~~developing comprehensive sets~~accommodate the transition of in vitro and in vivo data, as needed for FDA Investigational New Drug (“IND”) applications. vivoPharm has developed industry recognized capabilities in early phase development and discovery, especially in immuno-oncology models, tumor micro-environment studies, specialized pharmacologythe BioPharma Business to Buyer. In particular, the Company agreed to provide to Buyer, among other things, certain personnel services, payroll processing, administration services and ~~PDx (patient derived xenograft) model studies that support basic discovery, preclinical~~benefit administration services, for a period not to exceed six months from July 15, 2019, subject to the terms and ~~phase 1 clinical trials.~~conditions of the TSA, in exchange for payment or reimbursement, as applicable, by Buyer for the costs related thereto, including salaries and benefits for certain of the Company’s BioPharma employees during the transition period. Unless and until John A. Roberts, the Company’s Chief Executive Officer, and Glenn Miles, the Company’s Chief Financial Officer, enter into part-time consulting arrangements with Buyer and/or IDXG to assist with the transition, if any, Buyer is reimbursing the Company for their salaries and benefits.

vivoPharm maintains three international locations, enabling the company to access global market opportunities. The headquarters in Victoria, Australia, specializes in safety and toxicology studies, including mammalian, genetic and in vitro, along with bioanalytical services including immune-analytical capabilities. vivoPharm’s U.S. based lab, located at the Hershey Center for Applied Research in Hershey, Pennsylvania, primarily focuses on screening and efficacy testing for a wide range of pharmaceutical and chemical products. The third location, in Munich, Germany, hosts project management and marketing personnel. Further, vivoPharm brings to CGI an additional 38 employees, 16 of which are located in the U.S. and 17 in Australia, with expertise in early stage discovery services and pre-clinical testing.siParadigm, Inc.

~~vivoPharm’s studies~~On July 5, 2019, the Company entered into an asset purchase agreement (the “Clinical Agreement”) by and among the Company and siParadigm, LLC (“siParadigm”), pursuant to which the Company sold to siParadigm, certain assets associated with the Company’s clinical laboratory business (the “Clinical Business,” and such assets, the “Designated Assets”), and agreed to cease operating its Clinical Business. The Designated Assets include intellectual property, equipment and customer lists associated with the Clinical Business, and the Company is providing certain transitional services to siParadigm pursuant to the Clinical Agreement.

The cash consideration paid by siParadigm at closing was approximately $747 thousand, which includes approximately $45 thousand for certain equipment plus a $1.0 million advance payment of the Earn-Out (as defined below), less approximately $177 thousand of supplier invoices paid directly by siParadigm, an adjustment of $11 thousand and transaction costs of approximately $110 thousand. The Earn-Out, to be paid over the 24 months post-closing, is based on fees for all tests performed by siParadigm for the Company’s clinical customers during the 12-month period following the closing (the “Earn-Out”). The Clinical Business sale (together with the BioPharma Disposal, the “Business Disposals”) was completed on July 8, 2019.

The Business Disposals have been ~~utilized~~classified as discontinuing operations in conformity with GAAP. Accordingly, BioPharma and Clinical operations and balances have been reported as discontinuing operations and removed from all financial disclosures of continuing operations. Unless otherwise indicated, information in Management's Discussion and Analysis relates only to support over 200 IND submissions to date across a range of therapeutic indications, including lymphomas, leukemia, GI-cancers, liver cancer, pancreatic cancer, non-small cell lung cancer, and other non-cancer rare diseases. vivoPharm is presently serving over forty biotechnology and pharmaceutical companies across five continents in over 55 studies and trials with highly specialized development, clinical and preclinical research. Over the past 10 years, vivoPharm has also generated an extensive library of human xenograft and syngeneic tumor models, including subcutaneous, orthotopic and metastatic models.continuing operations.

2019 Offerings

~~vivoPharm’s specialized tumor~~ In January 2019, the Company closed two public offerings and ~~disease models, toxicology~~issued an aggregate of952 thousand shares of common stock for approximately $5.4 million, net of expenses and ~~pharmacology services~~discounts of approximately $1.1 million. The Company also issued 67 thousand warrants to its underwriters in conjunction with these offerings.

Note Payable to Atlas Sciences, LLC

On October 21, 2019, the Company issued an unsecured promissory note to Atlas Sciences, LLC (“Atlas Sciences”), an affiliate of Iliad Research and ~~animal imaging capabilities provide CGI opportunities~~Trading, L.P. (“Iliad”), for $1.3 million (the “Atlas Sciences Note”). The Company received consideration of $1.3 million, reflecting an original issue discount of $88 thousand and expenses payable by the Company of $10 thousand. The Atlas Sciences Note has a 12-month term and bears interest at 10% per annum. The proceeds from the Atlas Sciences Note were utilized to deepen its relationships with existing biopharma customers through additional discovery and downstream molecular work, while also furthering CGI’s previously announced initiative aimed at early-phase drug repurposing and drug rescue programs.partially repay the convertible promissory note issued to Iliad on July 17, 2018 (the "Convertible Note"), which was settled in cash for $2.7 million in October 2019.

Key Factors Affecting ~~our~~the Company's Results of Operations and Financial Condition

~~Our overall long-term growth plan~~The Company's wholly-owned subsidiary, vivoPharm, provides proprietary preclinical oncology and immuno-oncology services, offering integrated services in different disease areas to the biotechnology and pharmaceutical industries. vivoPharm is ~~predicated on our ability~~a leader in orthotopic and metastases tumor models. The Company provides all services including toxicology testing and bioanalytical analysis to ~~develop~~GLP. vivoPharm specializes in conducting studies tailored to guide drug development, starting from compound libraries and ~~commercialize our proprietary tests, penetrate the Biopharma community to achieve more revenue supporting clinical trials~~ending with a comprehensive set of in vitro and ~~develop~~in vivo data and penetrate the Indian market. Our proprietary tests include CGH microarrays, NGS panels, and DNA FISH probes. We continue to develop additional proprietary tests. To facilitate market adoption of our proprietary tests, we anticipate having to successfully complete additional studies with clinical samples and publish our results in peer-reviewed scientific journals. Ourreports, as needed for Investigational New Drug (IND) filing.

The Company's ability to complete such studies is dependent upon ~~our~~its ability to leverage ~~our~~its collaborative relationships with pharmaceutical and biotechnology companies and leading institutions to facilitate ~~our~~its research and obtain data for ~~our~~its quality assurance and test validation efforts.

~~We believe~~The Company believes that the factors discussed in the following paragraphs have had and are expected to continue to have a material impact on ~~our~~its results of operations and financial condition.

Revenues from Continuing Operations

~~Our revenue is primarily generated through our Clinical Services and Biopharma Services. Clinical Services can be billed to Medicare, another third party insurer or~~Revenue from the referring community hospital or other healthcare facility or patients in accordance with state and federal law. Biopharma Services are billed to the customer directly. While we have agreements with our Biopharma clients, volumes from these clients are subject to the progression and continuation of the clinical trials which can impact testing volume. We also derive revenue fromCompany's Discovery Services ~~which are~~comes from preclinical oncology and immuno-oncology services ~~provided~~offered to its biotechnology and pharmaceutical customers. The Company is a leader in ~~the development of new~~orthotopic and metastases tumor models and offer whole body imaging, in addition to toxicology testing ~~assays~~ and ~~methods.~~bioanalytical analysis. Discovery Services are ~~billed directly~~designed to specialize in conducting studies tailored to guide drug development, starting from compound libraries and ending with a comprehensive set of in vitro and in vivo data and reports, as needed for Investigational New Drug (IND) filing.

Due to the ~~customer.~~

~~We have historically derived a significant portion of our revenue~~Business Disposals that occurred in July 2019, revenues from ~~a limited number of test ordering sites, although~~ the ~~test ordering sites that generate a significant portion of our revenue have changed from period to period. Test ordering sites account for all of our~~Company's Biopharma Services and Clinical Services ~~revenue along with a portion~~are presented net of the Biopharma Services revenue. Our test ordering sites are 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 companyexpenses in ~~which the patient is being enrolled.~~

The top five test ordering sites during the three months ended September 30, 2017 and 2016 accounted for approximately 45% and 39% of our testing volumes, respectively. During the three months ended September 30, 2017, one Biopharma client accounted for approximately 11% of our revenue. During the three months ended September 30, 2016, one Biopharma client accounted for approximately 18% of our revenue.

We receive revenue for our Clinical Services from Medicare, other insurance carriers and other healthcare facilities. Some of our customers choose, generally at the beginning of our relationship, to pay for laboratory services directly as opposed to having patients (or their insurers) pay for those services and providing us with the patients’ insurance information. A hospital may elect to be a direct bill customer and pay our bills directly, or may provide us with patient information so that their patients pay our bills, in which case we generally expect payment from their private insurance carrier or Medicare. In a few instances, we have arrangements where a hospital may have two accounts with us, so that certain tests are billed directly to the hospital, and certain tests are billed to and paid by a patient’s insurer. The billing arrangements generally are dictated by our customers and in accordance with state and federal law.

For the three months ended September 30, 2017, Medicare accounted for approximately 11% of our total revenue, other insurance accounted for approximately 19% of our total revenue and other healthcare facilities accounted for 6% of our total revenue. For the nine months ended September 30, 2017, Medicare accounted for approximately 14% of our total revenue, other insurance accounted for approximately 22% of our total revenue and other healthcare facilities accounted for 5% of our total revenue. On average, we generate less revenue per test from other healthcare facilities billed directly, than from other insurance payers. discontinuing operations.

Cost of Revenues from Continuing Operations

~~Our~~The Company's cost of revenues consists principally of internal personnel costs, including non-cash stock-based compensation, laboratory consumables, shipping costs, overhead and other direct expenses, such as specimen procurement and ~~third party~~third-party validation studies. ~~We are pursuing~~The Company continues to pursue various strategies to ~~reduce and~~ control ~~our~~its cost of revenues, including automating ~~our~~the Company's processes through more efficient technology and attempting to negotiate improved terms with ~~our~~its suppliers. With our three acquisitions in 2014 and 2015, we have made significant progress with integrating our resources and services in an effort to reduce costs. With our acquisition of vivoPharm in the third quarter of 2017, we are working to integrate its business and reduce costs. We will continue to assess other possible advantages to help us improve our cost structure.

Operating Expenses from Continuing Operations

~~We classify our~~The Company classifies its operating expenses into ~~three~~two categories: ~~research~~general and ~~development,~~administrative, and sales and ~~marketing, and general and administrative. Our~~marketing. The Company's operating expenses principally consist of personnel costs, including non-cash stock-based compensation, ~~facility costs,~~ outside services, laboratory consumables and overhead, development costs, marketing program costs and legal and accounting fees.

~~Research and Development Expenses.~~ We incur research and development expenses principally in connection with our efforts to develop our proprietary tests. Our primary research and development expenses consist of direct personnel costs, laboratory equipment and consumables and overhead expenses. In 2013, we entered into a joint venture with the Mayo Foundation for Medical Education and Research, with a focus on developing oncology diagnostic services and tests utilizing next generation sequencing. These efforts have continued. All research and development expenses are charged to operations in the periods they are incurred.

General and Administrative Expenses. General and administrative expenses consist principally of personnel-related expenses, professional fees, such as legal, accounting and business consultants, occupancy costs, bad debt and other general expenses. ~~We have experienced decreases in our general and administrative expenses but anticipate increases as we expand our business operations.~~

Sales and Marketing ~~Expenses~~Expenses.~~. Our~~ The Company's sales and marketing expenses consist principally of personnel and related overhead costs for ~~our sales~~its business development team and their support personnel, travel and entertainment expenses, and other selling costs including sales collaterals and trade shows. ~~We expect our~~The Company expects its sales and marketing expenses to increase due to additional salaries as ~~we expand into new geographies~~it continues to operate and ~~add new clinical tests and services.~~grow its Discovery Services business.

~~Seasonality~~

~~Our business experiences decreased demand during spring vacation season, summer months~~Coronavirus (COVID-19) Pandemic. On March 11, 2020 the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide.In addition, the Company is located in New Jersey and was under a shelter-in-place mandate. Many of the Company's customers worldwide were similarly impacted. The global outbreak of COVID-19 continues to rapidly evolve, and the ~~December holiday season when patients~~extent to which COVID-19 may impact the Company's business will depend on future developments, which are ~~less likely~~highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to ~~visit their~~contain and treat the disease. As a healthcare provider, the Company is still providing Discovery Services and has yet to experience a slowdown in its project work, however, the future of many projects may be delayed. The Company continues to vigilantly monitor the situation with its primary focus on the health ~~care providers. We expect this trend in seasonality to continue for the foreseeable future.~~and safety of its employees and clients.

~~Results of Operations~~

Three Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019

The following table sets forth certain information concerning ~~our~~the Company's results of continuing operations for the periods shown:


	Three Months Ended September 30,						Change					Three Months Ended March 31,						Change
(dollars in thousands)	2017			2016			$			%		2020			2019			$			%
Revenue	$	8,028		$	6,750		$	1,278		19	%	$	1,426		$	1,822		$	(396	)	(22	)%
Cost of revenues	4,588			4,444			144			3	%	814			1,002			(188		)	(19	)%
Research and development expenses	981			1,594			(613		)	(38	)%
General and administrative expenses	4,346			3,701			645			17	%
Sales and marketing expenses	1,301			1,054			247			23	%
General and administrative												1,533			1,782			(249		)	(14	)%
Sales and marketing												341			185			156			84	%
Loss from operations	(3,188		)	(4,043		)	855			(21	)%	(1,262		)	(1,147		)	(115		)	10	%
Interest income (expense)	(340		)	(107		)	(233		)	218	%
Interest expense, net												(74		)	(613		)	539			(88	)%
Change in fair value of acquisition note payable	105			18			87			483	%	4			—			4			n/a
Change in fair value of other derivatives												—			31			(31		)	(100	)%
Change in fair value of warrant liability	2,790			712			2,078			292	%	127			(7		)	134			(1,914	)%
Other expense	—			(325		)	325			(100	)%
Net (loss)	$	(633	)	$	(3,745	)	$	3,112		(83	)%
Change in fair value of siParadigm Earn-Out												24			—			24			n/a
Loss before income taxes												(1,181		)	(1,736		)	555			(32	)%
Income tax expense												6			—			6			n/a
Loss from continuing operations												$	(1,187	)	$	(1,736	)	$	549		(32	)%

Non-GAAP Financial Information

In addition to disclosing financial results in accordance with United States generally accepted accounting principles (“GAAP”), the table below contains non-GAAP financial measures that wethe Company believe are helpful in understanding and comparing ~~our~~its past financial performance and ~~our~~its future results. The non-GAAP financial measures disclosed by the Company exclude the non- operating changes in the fair value of derivative instruments. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes that these non-GAAP measures provide useful information about the Company’s core operating results and thus are appropriate to enhance the

overall understanding of the Company’s past financial performance and its prospects for the future. The non-GAAP financial measures are included in the table ~~below include adjusted net (loss) and the related adjusted basic and diluted net (loss) per share amounts.~~below.

Reconciliation from GAAP to Non-GAAP Results (in ~~thousands, except per share amounts)~~thousands):

Three Months Ended September 30,
2017 2016
Reconciliation of net (loss):
Net (loss) $ (633 ) $ (3,745 )
Adjustments:
Change in fair value of acquisition note payable (105 ) (18 )
Change in fair value of warrant liability (2,790 ) (712 )
Adjusted net (loss) $ (3,528 ) $ (4,475 )
Reconciliation of basic net (loss) per share:
Basic net (loss) per share $ (0.03 ) $ (0.23 )
Adjustments to net (loss) (0.13 ) (0.04 )
Adjusted basic net (loss) per share $ (0.16 ) $ (0.27 )
Basic weighted-average shares outstanding 21,577
16,519
Reconciliation of diluted net (loss) per share:
Diluted net (loss) per share $ (0.15 ) $ (0.23 )
Adjustments to net (loss) (0.01 ) (0.04 )
Adjusted diluted net (loss) per share $ (0.16 ) $ (0.27 )
Diluted weighted-average shares outstanding 22,359
16,519



	Three Months Ended March 31,
	2020			2019
Reconciliation of net loss from continuing operations:
Net loss from continuing operations	$	(1,187	)	$	(1,736	)
Adjustments:
Interest expense, net	74			613
Depreciation	52			14
Amortization	79			82
Stock-based compensation	58			119
Change in fair value of acquisition note payable	(4		)	—
Change in fair value of other derivatives	—			(31		)
Change in fair value of warrant liability	(127		)	7
Change in fair value of siParadigm Earn-Out	(24		)	—
Income tax expense	6			—
Adjusted EBITDA loss from continuing operations	$	(1,073	)	$	(932	)

Adjusted ~~net (loss) decreased 21%~~EBITDA loss from continuing operations increased 15% to ~~$3.5~~$1.1 million during the three months ended ~~September 30, 2017, down~~March 31, 2020, from an adjusted ~~net (loss)~~EBITDA loss from continuing operations of ~~$4.5 million~~$932 thousand during the three months ended ~~September 30, 2016. Adjusted basic net (loss) per share decreased 41% to $0.16 during the three months ended September 30, 2017, down from $0.27 during the three months ended September 30,~~

~~2016. Adjusted diluted net (loss) per share decreased 41% to $0.16 during the three months ended September 30, 2017, down from $0.27 during the three months ended September 30, 2016.~~

~~Revenue~~

~~The breakdown of our revenue is as follows:~~

Three Months Ended September 30, Change
2017 2016
(dollars in thousands) $ % $ % $ %
Biopharma Services $ 4,168
52 % $ 3,805
56 % $ 363
10 %
Clinical Services 2,880
36 % 2,687
40 % 193
7 %
Discovery Services 980
12 % 258
4 % 722
280 %
Total Revenue $ 8,028
100 % $ 6,750
100 % $ 1,278
19 %
March 31, 2019.

Revenue ~~increased 19%~~from Continuing Operations

Revenue from continuing operations decreased 22%, or ~~$1.3 million,~~$396 thousand, to ~~$8.0~~$1.4 million for the three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$6.8~~$1.8 million for the three months ended ~~September 30, 2016,~~March 31, 2019, principally due to ~~an increase~~Tissue of Origin® tests of approximately $300 thousand in ~~Discovery Services~~2019. Additional revenues from the Tissue of ~~$0.7 million and an increase in our Biopharma Services~~Origin® tests are not expected to occur until the second half of ~~$0.4 million. Our average revenue per test~~2020.

Cost of Revenues from Continuing Operations

Cost of revenues from continuing operations decreased 19%, or $188 thousand, to ~~$376 per test~~$814 thousand for the three months ended ~~September 30, 2017~~March 31, 2020 from $397 per test for the three months ended September 30, 2016, principally due to the additional Clinical Services volume from our Los Angeles facility, which yields lower average revenue per test. Test volume increased by 11% from 12,348 tests for the three months ended September 30, 2016 to 13,726 tests for the three months ended September 30, 2017.

~~Revenue from Biopharma Services increased 10%, or $0.4 million, to $4.2~~$1.0 million for the three months ended September 30, 2017, from $3.8 million for the three months ended September 30, 2016 due to completing more studies from its top ten customers. Revenue from Clinical Services customers increased by $0.2 million, or 7%, compared to the three months ended September 30, 2016, due to increased clinical test volume. Revenue from Discovery Services increased 280%, or $0.7 million, during the three months ended September 30, 2017 due to the acquisition of vivoPharm, which accounted for $0.8 million of the increase.

~~Cost of Revenues~~

~~Cost of revenues increased 3%, or $0.1 million, for the three months ended September 30, 2017,~~March 31, 2019, principally due to ~~increased payroll and benefit~~a reduction in outsourcing costs of ~~$0.2 million offset by reduced costs~~$182 thousand. As a result of ~~supplies used~~the changes in ~~our testing facilities~~revenues and cost of ~~$0.1 million. Gross~~revenues, gross margin ~~improved~~decreased to 43% during the three months ended ~~September 30, 2017 up~~March 31, 2020 from ~~34% for~~45% during the three months ended ~~September 30, 2016.~~March 31, 2019.

Operating Expenses from Continuing Operations

~~Research~~General and ~~development~~administrative expenses from continuing operations decreased ~~38%~~14%, or ~~$0.6 million,~~$249 thousand, to ~~$1.0~~$1.5 million for the three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$1.6~~$1.8 million for the three months ended September 30, 2016, principally due to a $0.3 million decrease in payroll and benefit costs and a $0.3 million decrease in lab supplies used to validate new diagnostic tests and perform certain research and development projects.

~~General and administrative expenses increased 17%, or $0.6 million, to $4.3 million for~~March 31, 2019, as the ~~three months ended September 30, 2017, from $3.7 million for the three months ended September 30, 2016, principally due to an increase in our bad debt reserve~~result of $0.7 million and an increase in payroll and other benefits of $0.3 million, offset by a $0.2 million decrease in facility costs resulting from the elimination of building management fees at our North Carolina location and decreased professional fees and taxes of $0.1 million each.on-going overall expense reduction initiatives.

Sales and marketing expenses from continuing operations increased ~~23%~~84%, or ~~$0.2 million,~~$156 thousand, to ~~$1.3 million~~$341 thousand for the three months ended ~~September 30, 2017,~~March 31, 2020, from ~~$1.1 million~~$185 thousand for the three months ended ~~September 30, 2016,~~March 31, 2019, principally due to increased ~~compensation costs of $0.3 million and offset by decreased facility costs of $0.1 million.~~headcount.

Interest ~~Income (Expense)~~Expense, Net

Net interest expense ~~increased 218%, or $0.2 million, to $0.3 million~~from continuing operations decreased by $539 thousand during the three months ended ~~September 30, 2017~~March 31, 2020 due to the ~~higher effective~~payoff of various debt agreements that were previously in place during the three months ended March 31, 2019. From the end of the same quarter in 2019, the Advance from NDX has declined from $1.5 million to $200 thousand at March 31, 2020, resulting in a reduction of $1.0 million of interest ~~rate on our refinanced debt.~~expense. The Convertible Note with Iliad of approximately $2.8 million at March 31, 2019 has been replaced by a note payable to Atlas with a balance at March 31, 2020 of $1.3 million, resulting in a

reduction of $285 thousand of interest expense. The Company allocated $786 thousand of this interest expense to discontinuing operations during the three months ended March 31, 2019.

Change in Fair Value of ~~Acquisition Note Payable~~Other Derivatives

~~The~~There were no other derivatives in 2020. During three months ended March 31, 2019, the Company recognized a gain of $31 thousand from the change in fair value of note payable resulted in approximately $105,000 and $18,000 of non-cash income for the three months ended September 30, 2017 and 2016, respectively. The fair value of the note representing part of the purchase price for BioServe decreased during the three months ended September 30, 2017 and 2016 as a consequence of a decrease in our stock price.other derivatives.

Change in Fair Value of Warrant Liability

Changes in fair value of some of ~~our~~the Company's common stock warrants may impact ~~our~~its quarterly results. Accounting rules require usthe Company to record certain of ~~our~~its warrants as a liability, measure the fair value of these warrants each quarter and record changes in that value in earnings. As a result of ~~a decrease~~changes in ~~our~~the Company's stock price, weit recognized non-cash income of ~~$2.8 million~~$127 thousand and ~~$0.7 million for~~expense of $7 thousand during the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, respectively. In the future, if our stock price increases, with all other factors being equal, we would record a non-cash charge as a result of changes in the fair value of our common stock warrants. Alternatively, if the stock price decreases, with all other factors being equal, we may record non-cash income.

~~Other Expense~~

~~During the three months ended September 30, 2016, we expensed $0.3 million of offering costs associated with the derivative warrants issued in the 2016 Offerings.~~

~~Nine Months Ended September 30, 2017 and 2016~~

The ~~following table sets forth certain information concerning our results of operations for the periods shown:~~

Nine Months Ended September 30, Change
(dollars in thousands) 2017 2016 $ %
Revenue $ 21,598
$ 19,819
$ 1,779
9 %
Cost of revenues 12,831
12,832
(1 ) — %
Research and development expenses 3,080
4,806
(1,726 ) (36 )%
General and administrative expenses 11,352
11,677
(325 ) (3 )%
Sales and marketing expenses 3,437
3,731
(294 ) (8 )%
Loss from operations (9,102 ) (13,227 ) 4,125
(31 )%
Interest income (expense) (760 ) (323 ) (437 ) 135 %
Change in fair value of acquisition note payable (114 ) 119
(233 ) (196 )%
Change in fair value of warrant liability (3,927 ) 729
(4,656 ) (639 )%
Other income (46 ) (325 ) 279
(86 )%
Loss before income taxes (13,949 ) (13,027 ) (922 ) 7 %
Income tax provision (benefit) (970 ) —
(970 ) n/a
Net (loss) $ (12,979 ) $ (13,027 ) $ 48
— %

~~Non-GAAP Financial Information~~

In addition to disclosing financial results in accordance with United States generally accepted accounting principles (“GAAP”), the table below contains non-GAAP financial measures that we believe are helpful in understanding and comparing our past financial performance and our future results. The non-GAAP financial measures disclosed by the Company exclude the non- operating changes in the fair value of derivative instruments. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated. Management believes that these non-GAAP measures provide useful information about the Company’s core operating results and thus are appropriate to enhance the overall understanding of the Company’s past financial performance and its prospects for the future. The non-GAAP financial measures in the table below include adjusted net (loss) and the related adjusted basic and diluted net (loss) per share amounts.

~~Reconciliation from GAAP to Non-GAAP Results (in thousands, except per share amounts):~~

Nine Months Ended September 30,
2017 2016
Reconciliation of net (loss):
Net (loss) $ (12,979 ) $ (13,027 )
Adjustments:
Change in fair value of acquisition note payable 114
(119 )
Change in fair value of warrant liability 3,927
(729 )
Adjusted net (loss) $ (8,938 ) $ (13,875 )
Reconciliation of basic and diluted net (loss) per share:
Basic and diluted net (loss) per share $ (0.65 ) $ (0.88 )
Adjustments to net (loss) 0.20
(0.05 )
Adjusted basic and diluted net (loss) per share $ (0.45 ) $ (0.93 )
Basic and diluted weighted-average shares outstanding 20,059
14,868

Adjusted net (loss) decreased 36% to $8.9 million during the nine months ended September 30, 2017, down from an adjusted net (loss) of $13.9 million during the nine months ended September 30, 2016. Adjusted basic and diluted net (loss) per share decreased 52% to $0.45 during the nine months ended September 30, 2017, down from $0.93 during the nine months ended September 30, 2016.

~~The breakdown of our revenue is as follows:~~

Nine Months Ended September 30, Change
2017 2016
(dollars in thousands) $ % $ % $ %
Biopharma Services 11,175
52 % $ 11,374
57 % $ (199 ) (2 )%
Clinical Services 8,887
41 % 7,685
39 % 1,202
16 %
Discovery Services 1,536
7 % 760
4 % 776
102 %
Total Revenue $ 21,598
100 % $ 19,819
100 % $ 1,779
9 %

Revenue increased 9%, or $1.8 million, to $21.6 million for the nine months ended September 30, 2017, from $19.8 million for the nine months ended September 30, 2016, principally due to an increase of $1.2 million in our Clinical Services and an increase in Discovery Services of $0.8 million, offset by a decrease of $0.2 million in our Biopharma Services. Our average revenue per test decreased to $378 per test for the nine months ended September 30, 2017 from $408 per test for the nine months ended September 30, 2016, principally due to the additional Clinical Services volume from our Los Angeles facility, which yields lower average revenue per test. Test volume increased by 12% from 36,156 tests for the nine months ended September 30, 2016 to 40,451 tests for the nine months ended September 30, 2017.

Revenue from Biopharma Services decreased 2%, or $0.2 million, to $11.2 million for the nine months ended September 30, 2017, from $11.4 million for the nine months ended September 30, 2016 due to completing fewer studies for its top ten customers. Revenue from Clinical Services customers increased by $1.2 million, or 16%, for the nine months ended September 30, 2017 due to increased volume in our clinical services laboratory operations in Los Angeles. Revenue from Discovery Services increased 102%, or $0.8 million, during the nine months ended September 30, 2017 due to our acquisition of vivoPharm, which accounted for all of the increase.

~~Cost of Revenues~~

Cost of revenues remained steady for the nine months ended September 30, 2017 and 2016. While lab supplies and facility costs both increased by $0.2 million during the nine months ended September 30, 2017, depreciation of equipment and outsourced labor decreased by $0.1 million and $0.2 million, respectively, during the nine months ended September 30, 2017. In addition, our shipping costs declined by $0.1 million during the nine months ended September 30, 2017. Gross margin improved to 41% during the nine months ended September 30, 2017 from 35% during the nine months ended September 30, 2016, as we continue to rationalize our cost structure from prior acquisitions and introduce greater efficiency in our laboratory operations.

~~Operating Expenses~~

Research and development expenses decreased 36%, or $1.7 million, to $3.1 million for the nine months ended September 30, 2017, from $4.8 million for the nine months ended September 30, 2016, principally due to reduced payroll and benefit costs of $0.7 million, decreased lab supplies of $0.7 million and reduced facility costs of $0.2 million.

General and administrative expenses decreased 3%, or $0.3 million, to $11.4 million for the nine months ended September 30, 2017, from $11.7 million for the nine months ended September 30, 2016, principally due to decreased facility costs of $0.6 million, decreased professional fess of $0.2 million, decreased miscellaneous expenses of $0.2 million and decreased franchise and property taxes of $0.2 million, partially offset by an increase in our bad debt reserve of $0.9 million.

Sales and marketing expenses decreased 8%, or $0.3 million, to $3.4 million for the nine months ended September 30, 2017, from $3.7 million for the nine months ended September 30, 2016, principally due to reduced travel and entertainment expenses of $0.2 million and decreased facility costs of $0.2 million.

~~Interest Income (Expense)~~

Net interest expense increased 135%, or $0.4 million, principally due to recognizing a loss on extinguishment of debt of $0.1 million in March 2017 and the higher effective interest rate on our refinanced debt.

~~Change in Fair Value of Acquisition Note Payable~~

The change in fair value of note payable resulted in $0.1 million in non-cash expense for the nine months ended September 30, 2017, as compared to non-cash income of $0.1 million for the nine months ended September 30, 2016. The fair value of the note representing part of the purchase price for BioServe increased during the nine months ended September 30, 2017 as a consequence of a increase in our stock price.

~~Change in Fair Value of Warrant Liability~~

Changes in fair value of some of our common stock warrants may impact our quarterly results. Accounting rules require us to record certain of our warrants as a liability, measure the fair value of these warrants each quarter and record changes in that value in earnings. As a result of an increase in our stock price, we recognized non-cash expense of $3.9 million for the nine months ended September 30, 2017. In the future, if our stock price increases, we would record a non-cash charge as a result of changes in the fair value of our common stock warrants. Consequently, we may be exposed to non-cash charges, or wethe Company may record non-cash income, as a result of this warrant exposure in future periods.

~~We recognized non-cash income~~Change in Fair Value of ~~$0.7 million during~~siParadigm Earn-Out

During the ~~nine~~three months ended ~~September 30, 2016 due to changes~~March 31, 2020, the Company recognized a $24 thousand increase in the fair value of the ~~warrants issued in the 2016 Offerings and the expiration of other unexercised warrants.~~

~~Other Expense~~

During the nine months ended September 30, 2017 and 2016, we expensed $46,000 and $0.3 million of issuance costs associated with the derivative warrants issued as part of the 2017 debt refinancing and the 2016 Offerings, respectively.siParadigm Earn-Out.

Liquidity and Capital Resources

Sources of Liquidity

~~Our~~The Company's primary sources of liquidity have been ~~funds generated from our debt financings and equity financings. In addition, we have generated funds from the following sources: (i)~~ cash collections from customers, funds generated from debt and ~~(ii)~~equity financings, and cash received from ~~sale of state NOL’s.~~the Business Disposals. The Company expects to continue generating additional cash from its customers in the future and from its Business Disposals for a limited time until the Earn-Out is paid as discussed below.

In ~~general, our~~July 2019, the Company completed two business disposals, resulting in an aggregate of $9.0 million of net cash proceeds at the time of closing; however, $1.0 million of the funds received is an advance from siParadigm that is being deducted from the Earn-Out amounts due during the period. At March 31, 2020. the estimated future Earn-Out payments from siParadigm, net of the remaining balance of the advance, were $281 thousand, which are expected to be collected in variable monthly payments through July 2021; the monthly payment amount is based on the number of tests performed by siParadigm for the Company's former Clinical Services' customers. At March 31, 2020, the Company also held a note receivable from IDXG (the Excess Consideration Note) for $888 thousand. The balance represents the AR Holdback of $153 thousand and the Indemnification Holdback of $735 thousand, which were due to the Company on January 15, 2020 and were received in full in April and May 2020, respectively.

The primary uses of the Company's liquidity have been cash ~~are providing for operating expenses, working capital purposes~~used to fund the Company's operations, as detailed in the cash flows section below, as well as cash used to repay the Company's lenders. During 2020, the Company significantly reduced the amount of its Advance from NDX. The Company is required to remit monthly installments of $50 thousand to NDX until the Advance from NDX is repaid. At March 31, 2020, the Company owed NDX $200 thousand, and ~~servicing debt. As~~subsequent to quarter-end, an additional $150 thousand was repaid on the Advance from NDX. The note payable to Atlas Sciences of

~~September 30, 2017, we have~~ $1.3 million matures in October 2020; furthermore, Atlas Sciences is entitled to demand monthly redemptions of up to ~~$4.0 million~~$300 thousand beginning in April 2020. In June 2020, the Company reduced the note payable to Atlas Sciences by $500 thousand through the exchange of ~~available borrowings~~shares of common stock.

The Company does not project that cash at March 31, 2020 will be sufficient to fund normal operations for the twelve months from ~~our line~~the issuance of ~~credit with Silicon Valley Bank,~~these financial statements in the Quarterly Report on Form 10-Q. The Company's ability to continue as a going concern is dependent on reduced losses and ~~we are able to sell shares to Aspire Capital.~~

~~Aspire Capital~~

On August 14, 2017, we entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Aspire Capital Fund, LLC, an Illinois limited liability company (“Aspire Capital”), which provides that Aspire Capital is committed to purchase up to an aggregate of $16.0 million of our common stock (the “Purchase Shares”) from time to time overimproved future cash flows. Alternatively, the term of the Purchase Agreement. Aspire Capital made an initial purchase of 1,000,000 Purchase Shares (the “Initial Purchase”) at a purchase price of $3.00 per share on the commencement date of the agreement.

After the commencement date, on any business day over the 24-month term of the Purchase Agreement, we have the right, in our sole discretion, to present Aspire Capital with a purchase notice (each, a “Purchase Notice”) directing Aspire Capital to purchase up to 33,333 Purchase Shares per business day, provided that Aspire Capital will notCompany may be required to ~~buy Purchase Shares pursuant~~raise additional equity or debt capital, or consummate other strategic transactions. These factors raise substantial doubt about the Company's ability to continue as a ~~Purchase Notice that was received by Aspire Capital~~going concern for the next twelve months from the issuance of these financial statements in the Quarterly Report on ~~any business day on which the last closing trade price of our common stock on the NASDAQ Capital Market is below $3.00.~~Form 10-Q. The Company ~~and Aspire Capital also may mutually agree to increase the number of shares~~can provide no assurance that ~~may be sold to as much as an additional 2,000,000 Purchase Shares per business day. The purchase price per Purchase Share~~these actions will be ~~$3.00. As consideration for entering into the Purchase Agreement, we issued 320,000 shares~~successful or that additional sources of ~~our common stock to Aspire Capital (“Commitment Shares”).~~

Our net proceeds will depend on several factors, including the frequency of our sales of Purchase Shares to Aspire Capital and the frequency at which the last closing trade price of our common stock is below $3.00, subject to a maximum of $16.0 million in gross proceeds, including the Initial Purchase. Our delivery of Purchase Noticesfinancing will be made subject to market conditions, in light of our capital needs from time to time and under the limitations contained in the Purchase Agreement. We currently intend to use the net proceeds from sales of Purchase Shares for general corporate purposes and working capital requirements.

~~As of September 30, 2017, the Company has sold 1,000,000 shares under this agreement~~available on favorable terms, if at $3.00 per share, resulting in proceeds of approximately $2,965,000, net of offering costs of approximately $35,000. The Company has also issued 320,000 shares as consideration for entering into the Purchase Agreement. The Company has not deferred any offering costs associated with this agreement.all.

Cash Flows from Continuing Operations

~~Our~~The Company's net cash flow from operating, investing and financing activities from continuing operations for the periods below were as follows:


	Nine Months Ended September 30,						Three Months Ended March 31,
(in thousands)	2017			2016			2020			2019
Cash provided by (used in):
Cash provided by (used in) continuing operations:
Operating activities	$	(10,249	)	$	(17,299	)	$	125		$	(1,136	)
Investing activities	(2,121		)	(472		)	—			(19		)
Financing activities	7,675			9,028			(163		)	5,402
Net (decrease) in cash and cash equivalents	$	(4,695	)	$	(8,743	)
Effect of foreign currency exchange rates on cash and cash equivalents and restricted cash							12			(79		)
Net increase (decrease) in cash and cash equivalents and restricted cash from continuing operations							$	(26	)	$	4,168

WeThe Company had cash and cash equivalents and restricted cash of ~~$4.8~~$3.9 million at ~~September 30, 2017,~~March 31, 2020, and ~~$9.5~~$4.2 million at December 31, ~~2016.~~2019. Restricted cash of $350 thousand was released from restriction in May 2020.

The ~~$4.7 million~~$26 thousand decrease in cash and cash equivalents and restricted cash from continuing operations for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, principally resulted from ~~net~~ cash ~~used in~~flows from operations of ~~$10.2 million, principal payments made on~~$125 thousand and the ~~Silicon Valley Bank term note~~effect of ~~$4.7 million and fixed asset additions~~foreign currency exchange rates of ~~$1.2 million, partially~~$12 thousand, offset by ~~proceeds from the exercise~~payments of ~~warrants of $1.8 million, net proceeds from the sale of stock to Aspire Capital of $3.0 million, proceeds from refinancing our~~ debt of ~~$6.0 million and borrowings on our line of credit of $2.0 million.~~$163 thousand.

The ~~$8.7~~$4.2 million ~~decrease~~increase in cash and cash equivalents and restricted cash for the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2019, principally resulted from ~~$17.3~~net proceeds from the 2019 Offerings of $5.4 million, ofoffset in part by net cash used in continuing operations ~~partially offset by $10.0 million~~ of ~~net proceeds from the 2016 Offerings.~~$1.1 million.

At ~~September 30, 2017, we~~March 31, 2020, the Company had total ~~indebtedness~~debt of ~~$8.0~~$1.5 million, excluding ~~capital~~finance lease obligations.

Cash Used in Operating Activities from Continuing Operations

Net cash ~~used in~~provided by continuing operating activities was ~~$10.2 million~~$125 thousand for the ~~nine~~three months ended ~~September 30, 2017. We used $4.7~~March 31, 2020, consisting of a net loss from continuing operations of $1.2 million, ~~in net~~positive non-cash adjustments of $80 thousand and additional cash ~~to fund our core operations, which included $0.6 million in cash paid for interest. We incurred additional uses of cash when adjusting for~~provided by working capital items ~~as follows:~~of $1.2 million. Changes in cash flows from working capital items were primarily driven by an increase in amounts due to Interpace of $1.2 million, a net ~~increase in accounts receivable of $4.0 million, an increase~~decrease in other current assets of ~~$0.6 million,~~$110 thousand, and a net decrease in accounts payable, accrued expenses and deferred revenue of ~~$1.1 million and a decrease in deferred rent payable and other of $0.1 million,~~$130 thousand. The cash provided by these activities was partially offset by a ~~decrease~~net increase of accounts receivable of $183 thousand. The increase in ~~other assets of $0.3 million.~~the amount due to Interpace was due to collections from Interpace's customers received under the TSA. This net amount was subsequently remitted under the TSA arrangement.

For the ~~nine~~three months ended ~~September 30, 2016, we~~March 31, 2019, the Company used ~~$17.3~~$1.1 million of cash in continuing operating activities. WeCash used ~~$10.5~~was made up of a net loss from continuing operations of $1.7 million, ~~in net cash to fund our core operations, which included $0.3 million in cash paid for interest. We incurred additional~~positive non-cash adjustments of $796 thousand, and uses of cash ~~when adjusting for~~relating to working capital items ~~as follows:~~of $196 thousand. Changes in cash flows from working capital items was primarily driven by a net increase in accounts receivable of ~~$7.1 million and an increase in other current assets of $0.1 million, offset by~~$103 thousand, a net ~~increase~~decrease in accounts payable, accrued expenses and deferred revenue of ~~$0.4 million.~~$109 thousand, and a net decrease in obligations under operating leases of $60 thousand. These uses of cash were partially offset by a decrease in other current assets of $77 thousand.

Cash Used in Investing Activities from Continuing Operations

Net cash provided by continuing investing activities was $0 thousand for the three months ended March 31, 2020.

Net cash used in continuing investing activities was ~~$2.1 million~~$19 thousand for the ~~nine~~three months ended ~~September 30, 2017 and resulted from~~March 31, 2019, relating to the purchase of fixed ~~assets of $1.2 million, patent costs of $0.1 million, net cash paid to acquire vivoPharm of $0.7 million and investing $0.2 million in a cost method investment.~~

~~Net cash used in investing activities was $0.5 million for the nine months ended September 30, 2016 and resulted from the purchase of fixed assets of $0.3 million and patent costs of $0.1 million.~~assets.

Cash Provided by Financing Activities from Continuing Operations

Net cash used in continuing financing activities was $163 thousand for the three months ended March 31, 2020 and relates principally to payments on the Advance from NDX of $150 thousand.

Net cash provided by continuing financing activities was ~~$7.7~~$5.4 million for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and resulted principally ~~resulted~~ from proceeds ~~received from warrants exercised~~ of ~~$1.8 million, proceeds from~~ the sale of stock to Aspire Capital of $3.0 million net of certain offering costs, proceeds from refinancing our debt of $6.0 million and proceeds from borrowing $2.0 million on our line of credit, offset by principal payments made on our Silicon Valley Bank term note of $4.7 million, capital lease payments of $0.2 million and debt issuance costs and loan fees of $0.3 million related to our refinanced debt.

~~Net cash provided by financing activities was $9.0 million for the nine months ended September 30, 2016 and principally resulted from proceeds received in the 2016~~2019 Offerings of ~~$10.0 million, offset by principal payments made on the bank term note of $0.8 million and capital lease payments of $0.1~~$5.4 million.

Capital Resources and Expenditure Requirements

~~We expect~~The Company expects to continue to incur ~~material~~ operating losses in the ~~near future. It~~future, as the costs of being public have significant effect on losses that keep the Company from being profitable. The Company expects losses to continue, only to the extent that the business does not outpace the public company-related expenses, such as legal and audit fees and director’s and officer’s liability insurance. These losses have had, and will continue to have, an adverse effect on the Company's working capital, total assets and stockholders’ equity. Because of the numerous risks and uncertainties associated with its revenue growth and costs associated with being a public company, the Company is unable to predict when it will become profitable, and it may ~~take several years,~~never become profitable. Even if ~~ever,~~the Company does achieve profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis. The Company's inability to achieve ~~positive operational~~and then maintain profitability would negatively affect its business, financial condition, results of operations and cash ~~flow. We~~flows. As a result, it may need to raise additional capital to fund ~~our~~its current operations, to repay certain outstanding indebtedness and to fund ~~expansion of our~~its business to meet ~~our~~its long-term business objectives through public or private equity offerings, debt financings, borrowings or strategic partnerships coupled with an investment in ~~our company~~the Company or a combination thereof. If ~~we raise~~the Company raises additional funds through the issuance of convertible debt securities, or other debt securities, these securities could be secured and could have rights senior to those of ~~our~~its common stock. In addition, any new debt incurred by the Company could impose covenants that restrict ~~our~~its operations and increase ~~our~~its interest expense. The issuance of any new equity securities will also dilute the interest of ~~our~~ current stockholders. Given the risks associated with our business, including our unprofitable operating history and our ability to develop additional proprietary tests, additional capital may not be available when needed on acceptable terms, or at all. If adequate funds are not available, we will need to curb our expansion plans or limit our research and development activities, which would have a material adverse impact on our business prospects and results of operations.

~~We believe~~The Company owes $1.3 million to Atlas Sciences under an unsecured note due in October 2020. The Company also owes an aggregate of $200 thousand to NDX as of March 31, 2020 pursuant to the NDX Settlement Agreement, which is payable in monthly installments of $50 thousand. The Company has no material capital commitments outside of its existing debt arrangements.

Even after the Business Disposals, the Company does not project that ~~our current~~ cash ~~taken together with the borrowings available from the Silicon Valley Bank line of credit and the common stock purchase agreement with Aspire Capital Fund, LLC,~~at March 31, 2020 will ~~support~~be sufficient to fund normal operations for ~~at least~~ the ~~next 12~~twelve months from the ~~date~~issuance of ~~this report. We~~these financial statements in the Quarterly Report on Form 10-Q. The Company's ability to continue as a going concern is dependent on reduced losses and improved future cash flows. Alternatively, the Company may be required to ~~explore opportunities for~~raise additional equity or debt ~~financing, and we are taking steps~~capital, or consummate other strategic transactions. These factors raise substantial doubt about the Company's ability to ~~improve our operating cash flow. We~~continue as a going concern for the next twelve months from the issuance of these financial statements in the Quarterly Report on Form 10-Q. The Company can provide no ~~assurances~~assurance that ~~our current~~these actions will be successful or that ~~any~~ additional sources of financing will be available ~~to us~~ on favorable terms, if at ~~all, when needed. Our~~all. The Company made this assessment in light of the expected impact of COVID 19.

The Company's forecast of the period of time through which ~~our~~its current financial resources will be adequate to support ~~our~~its operations and ~~the costs to support our general and administrative, sales and marketing and research and development activities are forward-looking statements and involve risks and uncertainties.~~

~~We expect our sales and marketing, research and development and other general and administrative expenses to increase as we continue to expand our business.~~

~~Our forecast of the period of time through which our current financial resources will be adequate to support our operations and our~~its expected operating expenses are forward-looking statements and involve risks and uncertainties. Actual results could vary materially and negatively as a result of a number of factors, including:

~~our~~the Company's ability to adapt its business for future developments in light of the global outbreak of the novel coronavirus, which continues to rapidly evolve;

the Company's ability to achieve ~~revenue growth~~profitability by increasing sales of the Company's preclinical CRO services focused on oncology and ~~profitability;~~immuno-oncology;

~~our~~the Company's ability to ~~improve efficiency of billing~~raise additional capital to repay its indebtedness and ~~collection processes;~~meet its liquidity needs;

~~our ability to obtain approvals for our new diagnostic tests;~~

~~our~~the Company's ability to execute on ~~our~~its marketing and sales strategy for ~~our tests and CRO~~its preclinical research services and gain acceptance of ~~our tests and CRO~~its services in the market;

~~our~~the Company's ability to keep pace with rapidly advancing market and scientific developments;

the Company's ability to satisfy U.S. (including FDA) and international regulatory requirements with respect to its services;

the Company's ability to maintain its present customer base and obtain new customers;

competition from preclinical CRO services companies, many of which are much larger than the Company in terms of employee base, revenues and overall number of customers and related market share;

the Company's ability to maintain the Company's clinical and research collaborations and enter into new collaboration agreements with highly regarded organizations in the field of oncology so that, among other things, the Company has access to thought leaders in advanced preclinical and translational science;

potential product liability or intellectual property infringement claims;

the Company's dependency on third-party manufacturers to supply it with instruments and specialized supplies;

the Company's ability to attract and retain a sufficient number of scientists, clinicians, sales personnel and other key personnel with extensive experience in oncology and immuno-oncology, who are in short supply;

the Company's ability to obtain ~~adequate reimbursement from governmental and~~or maintain patents or other ~~third-party payors~~appropriate protection for ~~our~~the intellectual property in its proprietary tests and services;

the ~~costs, scope, progress, results, timing~~Company's ability to effectively manage its international businesses in Australia, Europe and ~~outcomes~~China, including the expansion of ~~the clinical trials~~its customer base and volume of ~~our tests;~~new contracts in these markets;

the ~~costs of operating~~Company's dependency on the intellectual property licensed to the Company or possessed by third parties; and ~~enhancing our laboratory facilities;~~

~~our~~

the Company's ability to ~~succeed with our cost control initiative;~~

~~the timing of and the costs involved in regulatory compliance, particularly if the regulations change;~~

~~the costs of maintaining, expanding and protecting our intellectual property portfolio, including potential litigation costs and liabilities;~~

~~our ability to manage the costs of manufacturing our tests;~~

~~our rate of progress in, and cost of research and development activities associated with, products in research and early development;~~

~~the effect of competing technological and market developments;~~

~~costs related to expansion;~~

~~our ability to secure financing and the amount thereof;~~adequately support future growth; and

other risks and uncertainties discussed in ~~our~~the Company's annual report on Form 10-K for the year ended December 31, ~~2016,~~2019, as updated in this ~~quarterly report on~~ Form 10-Q and other reports, as applicable, wethe Company file with the Securities and Exchange Commission.

~~We expect~~The unaudited condensed consolidated financial statements for the three months ended March 31, 2020 were prepared on the basis of a going concern, which contemplates that ~~our operating expenses may slightly increase as a result of our purchase of vivoPharm, but at a lesser rate than~~ the ~~expected increase in revenue. We expect our capital expenditures~~Company will ~~slightly increase~~be able to realize assets and discharge liabilities in the ~~future as we expand our~~normal course of business. ~~We plan~~Accordingly, they do not give effect to ~~increase our sales and marketing headcount~~adjustments that would be necessary should the Company be required to ~~promote our new clinical tests and services and~~liquidate its assets. The ability of the Company to ~~expand into new geographies~~meet its obligations, and to continue our research and development expenditures associated with performing work with research collaborators, to expand our pipeline and to perform work associated with our research collaborations. For example, in 2011 we entered into an affiliation agreement to formas a joint venture with the Mayo Foundation for Medical Education and Research pursuant to which we made an initial $1.0 million capital contribution in October 2013 and $1.0 million in the third quarter of 2014. We may make additional capital contributions of up to $4.0 million, subject to the joint venture entity’s achievement of certain operational milestones. Until we can generate a sufficient amount of revenues to finance our cash requirements, which we may never do, we will need to raise additional capital to fund our operations.

~~Subject to~~going concern is dependent upon the availability of ~~financing, we may use significant cash to fund acquisitions.~~

~~In March 2017, we entered into a new line~~future funding and the continued growth in revenues. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of credit with Silicon Valley Bank and refinanced our term note with a new lender, Partners for Growth. See Note 6 of Notes to Unaudited Consolidated Financial Statements included in Item 1 of this quarterly report on Form 10-Q. In August 2017, we entered into a common stock purchase agreement with Aspire Capital Fund, LLC. See Note 3 of Notes to Unaudited Consolidated Financial Statements included in Item 1 of this quarterly report on Form 10-Q.these uncertainties.

Income Taxes

Over the past several years ~~we have~~the Company has generated operating losses in all jurisdictions in which weit may be subject to income taxes. As a result, ~~we have~~the Company has accumulated significant net operating losses and other deferred tax assets. Because of ~~our~~the Company's history of losses and the uncertainty as to the realization of those deferred tax assets, a full valuation allowance has been recognized. ~~We do~~The Company does not expect to report a benefit related to the deferred tax assets until ~~we have~~it has a history of earnings, if ever, that would support the realization of ~~our~~its deferred tax assets. ~~Utilization of these net operating loss carryforwards is subject to limitation due to ownership changes that may delay the utilization of a portion of the carryforwards.~~

Off-Balance Sheet Arrangements

Since inception, ~~we have~~the Company has not engaged in any off-balance sheet activities as defined in Item 303(a)(4) of Regulation S-K.

Critical Accounting Policies and Significant Judgment and Estimates

~~Our~~The Company's management’s discussion and analysis of financial condition and results of operations is based on ~~our~~its unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of ~~our~~unaudited condensed consolidated financial statements requires usmanagement to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, wethe Company evaluate ~~our~~its estimates based on historical experience and make various assumptions, which management believes to be reasonable under the circumstances, which form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Section 107 of the JOBS Act provides that an “emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we have chosen to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

The notes to ~~our~~the Company's audited consolidated financial statements in ~~our~~its annual report on Form 10-K for the year ended December 31, ~~2016~~2019 contain a summary of ~~our~~the Company's significant accounting policies. ~~We consider~~Management considers the following accounting policies critical to the understanding of the results of ~~our~~the Company's operations:

Revenue recognition;

Accounts receivable and bad debts;

Warrant liabilities and other derivatives;

Stock-based compensation;

Income taxes; and

~~Warrant liability.~~Impairment of intangibles and long-lived assets.

Cautionary Note Regarding Forward-Looking Statements

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include all statements that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential,” or the negative of those terms, and similar expressions and comparable terminology intended to identify forward-looking statements. These statements reflect ~~our~~the Company current views with respect to future events. There are a number of important factors that could cause the actual results to differ materially from those expressed in any forward-looking statement made by ~~us.~~the Company. These factors include, but are not limited to:

~~our~~•

the Company's ability to adapt its business for future developments in light of the global outbreak of the novel coronavirus, which continues to rapidly evolve;

the Company's ability to achieve profitability by increasing sales of ~~our laboratory tests~~the Company's preclinical CRO services focused on oncology and ~~services and to continually develop and commercialize novel and innovative diagnostic tests and services for cancer patients;~~immuno-oncology;

~~our~~the Company's ability to ~~improve efficiency of billing~~raise additional capital to repay its indebtedness and ~~collection processes;~~meet its liquidity needs;

~~with respect to our Clinical Services, our ability to obtain reimbursement from governmental and other third-party payors for our tests and services;~~

~~our ability clinically validate our pipeline of tests currently in development;~~

~~our~~the Company's ability to keep pace with rapidly advancing market and scientific developments;

~~our~~the Company's ability to satisfy U.S. (including FDA) and international regulatory requirements with respect to ~~our tests~~its services;

the Company's ability to maintain its present customer base and obtain new customers;

competition from preclinical CRO services companies, many of which are ~~new~~much larger than the Company in terms of employee base, revenues and ~~still evolving;~~overall number of customers and related market share;

~~our ability to raise additional capital to meet our liquidity needs;~~

~~competition from clinical laboratory services companies, tests currently available or new tests that may emerge;~~

~~our~~the Company's ability to maintain ~~our~~the Company's clinical and research collaborations and enter into new collaboration agreements with highly regarded organizations in the ~~cancer~~ field of oncology so that, among other things, ~~we have~~the Company has access to thought leaders in ~~the field~~advanced preclinical and ~~to a robust number of samples to validate our tests;~~

~~our ability to maintain our present customer base and obtain new customers;~~translational science;

potential product liability or intellectual property infringement claims;

~~our~~the Company's dependency on third-party manufacturers to supply ~~or manufacture our products;~~it with instruments and specialized supplies;

~~our~~the Company's ability to attract and retain a sufficient number of scientists, clinicians, sales personnel and other key personnel with extensive experience in oncology and immuno-oncology, who are in short supply;

~~our~~the Company's ability to obtain or maintain patents or other appropriate protection for the intellectual property in ~~our~~its proprietary tests and services;

~~our~~the Company's ability to effectively manage its international businesses in Australia, Europe and China, including the expansion of its customer base and volume of new contracts in these markets;

the Company's dependency on the intellectual property licensed to usthe Company or possessed by third parties;

~~our ability to expand internationally and launch our tests in emerging markets, such as India and Brazil;~~

~~our~~the Company's ability to adequately support future growth; and

~~the risk factors~~other risks and uncertainties discussed in ~~our~~the Company's annual report on Form 10-K for the year ended December 31, ~~2016,~~2019, as updated in this ~~quarterly report on~~ Form 10-Q and other reports, as applicable, ~~that we~~the Company file with the Securities and Exchange Commission.

Given these uncertainties, you should not place undue reliance on these forward-looking statements. These forward-looking statements represent ~~our~~the Company's estimates and assumptions only as of the date of this ~~quarterly report~~Quarterly Report on Form 10-Q and, except as required by law, wethe Company undertake no obligation to update or review publicly any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this ~~quarterly report~~Quarterly Report on Form 10-Q. You should read this ~~quarterly report~~Quarterly Report on Form 10-Q and the documents referenced herein and filed as exhibits completely and with the understanding that ~~our~~the Company's actual future results may be materially different from what ~~we expect.~~the Company expects.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

WeThe Company evaluated, under the supervision and with the participation of the principal executive officer and principal financial officer, the effectiveness of the design and operation of ~~our~~the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934 (“Exchange Act”), as amended, as of ~~September 30, 2017,~~March 31, 2020, the end of the period covered by this report on Form 10-Q. Based on this evaluation, ~~our~~the Company's President and Chief Executive Officer (principal executive officer) and ~~our~~its Chief ~~Operating~~Financial Officer (principal financial officer) have concluded that ~~our~~its disclosure controls and procedures were not effective at the reasonable assurance level at ~~September 30, 2017.~~March 31, 2020 because of the material weakness in the Company’s internal control over financial reporting that existed at December 31, 2019 that has not been remediated by the end of the period covered by this Quarterly Report on Form 10-Q.

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed by usthe Company in the reports that ~~we file~~the Company files or ~~submit~~submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions

regarding required disclosures. 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. Due to the inherent limitations of control systems, not all misstatements may be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Controls and procedures can only provide reasonable, not absolute, assurance that the above objectives have been met.

Changes in Internal Control over Financial Reporting

~~There~~Other than changes related to the remediation activities discussed below, there were no changes in ~~our~~the Company's internal control over financial reporting during the three months ended ~~September 30, 2017~~March 31, 2020 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Material Weakness in Internal Control over Financial Reporting

Subsequent to the evaluation made in connection with filing the Company's annual report on Form 10-K for the year ended December 31, 2019, management has begun the process of remediation of the material weaknesses included in the Form 10-K, including further improvements in processes and analyses that support the recording of foreign currency exchanges and the fair value of investments. In 2020, management plans to include additional journal entry review procedures to enhance its remediation efforts. Management is committed to remediating the material weaknesses by changing its internal control over financial reporting.

The Company believes these actions will be sufficient to remediate the identified material weakness and to enhance its internal control over financial reporting. However, the new enhanced controls have not operated long enough to conclude at the time of this filling that the material weaknesses were remediated. The Company expects these deficiencies to be corrected by the end of 2020.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

~~In the normal course~~On June 1, 2018, September 20, 2018, and September 25, 2018, purported stockholders of ~~business,~~ the Company ~~may become involved~~filed nearly identical derivative lawsuits on behalf of the Company in ~~various~~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. The Court entered stipulations filed by the parties staying the actions until the Securities Litigation (as defined in Note 14 to the Company's unaudited condensed consolidated financial statements above) 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 the parties give 30 days’ notice that they no longer consent to the stay. On February 25, 2020, the Court dismissed the Securities Litigation with prejudice upon the Company's motion to dismiss due to failure to state a claim. Accordingly, on May 15, 2020, the plaintiffs in the Workman action filed a notice of voluntary dismissal to the original action and have formally withdrawn. On May 18, 2020, the plaintiffs in the McNeece action filed a notice of voluntary dismissal to the original action and have formally withdrawn. On June 22, 2020, the plaintiffs in the Bell action voluntarily dismissed their action. Based upon the above dismissal of the securities class action litigation, the Company believes this matter is closed. The Company is expensing legal ~~proceedings. In~~costs associated with the ~~opinion of management, the ultimate liability or disposition thereof is not expected to have a material adverse effect on our financial condition, results of operations, or liquidity.~~loss contingency as incurred.

Item 1A. Risk Factors

~~Except as set forth below, there~~There have been no material changes to the risk factors disclosed in Part 1, Item 1A, of ~~our~~the Company's annual report on Form 10-K for the year ended December 31, ~~2016.~~

~~Risks Related to the vivoPharm Acquisition~~

~~Any acquisition exposes a company to additional risks.~~

~~Acquisitions may entail numerous risks for Cancer Genetics, including:~~

~~competing claims for capital resources;~~

~~uncertainty regarding our ability to retain and grow relationships with vivoPharm’s key customers;~~

~~difficulties in assimilating acquired operations, technologies or products; and~~

~~diversion of management’s attention from our core business.~~2019, except as noted below:

Our ~~failure~~business is subject to ~~successfully complete~~risks arising from epidemic diseases, such as the ~~integration~~recent global outbreak of ~~vivoPharm~~the COVID-19 coronavirus.

The recent outbreak of the novel coronavirus, COVID-19, which has been declared by the World Health Organization to be a pandemic, has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19 or other public health epidemic, poses the risk that the Company or its employees, contractors, suppliers, courier delivery services and other partners may be prevented from conducting business activities for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the impact that COVID-19 could have on the Company’s business, the COVID-19 pandemic and mitigation measures have had and may continue to have an adverse impact on global economic conditions which could have an adverse effect on the Company’s business and financial condition, including impairing the ability to raise capital when needed.

The continued spread of COVID-19 and the measures taken by the governments of countries affected could disrupt the supply chain of material needed for the Company’s Discovery Services and could delay future projects from commencing due to COVID-19 related impacts on the demand for Company services and therefore have a material adverse effect on ~~our~~the Company’s business, financial condition and ~~operating results.~~results of operations.

~~Failure~~In addition, the Company’s corporate and accounting functions are located in New Jersey and are currently subject to a shelter-in-place mandate. The Company’s U.S. based preclinical laboratory is located in Pennsylvania and is subject to a stay-at-home order, and many of the ~~vivoPharm acquisition~~Company’s customers worldwide are similarly impacted. As a healthcare provider, the Company is allowed to ~~achieve potential benefits could harm~~remain open in compliance with the ~~business~~shelter-in-place and ~~operating results~~stay-at-home mandates and continue to provide critical services in the development of new therapies and the fight against cancer. The Company is still providing Discovery Services, and has yet to experience a slowdown in project work as a result of the ~~combined company.~~

~~We expect that~~COVID-19 pandemic; however, the ~~acquisition~~future of ~~the vivoPharm businesses will result in potential benefits for the combined company, the expansion~~many projects may be delayed. The global outbreak of ~~the number~~COVID-19 continues to rapidly evolve, and geographic coverage of our sales and marketing team, stronger penetration into new biotechnology customers, an extended portfolio of capabilities which will differentiate us in the markets we serve, advancing our strategy of bench-to-bedside services, and bolstering our growth with a global customer base of biopharma partners. No assurance can be given that we will achieve any or all of these potential benefits. Even if we are able to achieve any of these potential benefits, we cannot predict with certainty when the benefits will occur, or to the extent to which ~~they actually will be achieved. For example, the benefits from the acquisition~~COVID-19 may ~~be offset by costs incurred in integrating the businesses. The failure to achieve anticipated benefits could harm the business, financial condition and operating results of the combined company.~~

If the market for the combined company’s tests and services does not experience significant growth or if the combined company’s tests and services do not achieve broad acceptance, the combined company’s operations will suffer.

Cancer Genetics cannot accurately predict the future growth rate or the size of the market for the combined company’s tests and services. The expansion of this market depends on a number of factors, such as:

~~the results of clinical trials;~~

~~the cost, performance and reliability of the combined company’s tests and services, and the tests and services offered by competitors;~~

~~customers’ perceptions regarding the benefits of the combined company’s test and services;~~

~~customers’ satisfaction with our tests and services; and~~

~~marketing efforts and publicity regarding our tests and services.~~

~~If the combined company is unable to manage growth in its business, its prospects may be limited and its future results of operations may be adversely affected.~~

Any significant expansion such as the acquisition of vivoPharm may strain the combined company’s managerial, financial and other resources. If the combined company is unable to manage its growth, its business, operating results and financial condition could be adversely affected. The combined company will need to improve continually its operations, financial and other

~~internal systems to manage its growth effectively, and any failure to do so may lead to inefficiencies and redundancies, and result in reduced growth prospects and diminished operational results.~~

~~Operating in multiple countries requires us to comply with different legal and regulatory requirements.~~

Other laws applicable to our international business include local clinical, employment, tax, privacy, data security, environmental and intellectual property protection laws and regulations. These requirements may differ significantly from the requirements applicable to our business in the U.S. and may require resources to accommodate, and may result in decreased operational efficiencies and performance. As these laws continue to evolve and if we expand to more jurisdictions or acquire new businesses, compliance will become more complex and expensive, and the risk of non-compliance will increase.

Compliance with complex foreign and U.S. laws and regulations that apply to our international operations increases our cost of doing business abroad, and violation of these laws or regulations may interfere with our ability to offer our tests and services competitively in one or more countries, expose us or our employees to fines and penalties, and result in the limitation or prohibition of our conduct of business.

~~The potential loss or delay of our large contracts or of multiple contracts could adversely affect our results.~~

Most of our Discovery Services clients can terminate our contracts upon 30 to 90 days notice. These clients may delay, terminate or reduce the scope of our contracts for a variety of reasons beyond our control, including but not limited to:

~~decisions to forego or terminate a particular clinical trial;~~

~~lack of available financing, budgetary limits or changing priorities;~~

~~actions by regulatory authorities;~~

~~production problems resultings in shortages of the drug being tested;~~

~~failure of products being tested to satisfy safety requirements or efficacy criteria;~~

~~unexpected or undesired clinical results for products;~~

~~shift of business to a competitor or internal resources; or~~

~~shut down of manufacturing facilities.~~

As a result, contract terminations, delays and alterations are a possible outcome in our Discovery Services business. In the event of termination, our contracts often provide for fees for winding down the project, but these fees may not be sufficient for us to maintain our margins, and termination may result in lower resource utilization rates. In addition, we may not realize the full benefits of our backlog of contractually committed services if our clients cancel, delay or reduce their commitments under our contracts with them, which may occur if, among other things, a client decides to shift its business to a competitor or revoke our status as a preferred provider. Thus, the loss or delay of a large contract or the loss or delay of multiple contracts could adversely affect our revenues and profitability. We believe the risk of loss or delay of multiple contracts potentially has greater effect where we are party to broader partnering arrangements with global biopharmaceutical companies.

~~Our financial results may be adversely affected if we underprice our contracts, overrun our cost estimates or fail to receive approval for or experience delays in documenting change orders.~~

Most of our Discovery Services contracts are either fee for service contracts or fixed-fee contracts. Our past financial results have been, and our future financial results may be, adversely impacted if we initially underprice our contracts or otherwise overrun our cost estimates and are unable to successfully negotiate a change order. Change orders typically occur when the scope of work we perform needs to be modified from that originally contemplated by our contract with the client. Modifications can occur, for example, when there is a change in a key clinical trial assumption or parameter or a significant change in timing. Where we are not successful in converting out-of-scope work into change orders under our current contracts, we bear the cost of the additional work. Such underpricing, significant cost overruns or delay in documentation of change orders could have a material adverse effect on ourimpact business, results of operations and financial ~~condition or cash flows.~~

~~If we fail to perform our services in accordance~~position will depend on future developments, which are highly uncertain and cannot be predicted with ~~contractual requirements, regulatory standards and ethical considerations, we could be subject to significant costs or liability and our reputation could be harmed.~~

In connection with our Discovery Services business, we contract with biopharmaceutical companies to provide specialized services to assist them in planning and conducting unique, specialized studies to guide drug discovery and development programs with a concentration in oncology and immuno-oncology. Our services include monitoring clinical trials, data and laboratory analysis, electronic data capture and other related services. Such services are complex and subject to contractual requirements, regulatory standards and ethical considerations. If we fail to perform our services in accordance with these

requirements, regulatory agencies may take action against us for failure to comply with applicable regulations governing clinical trials. Clients may also bring claims against us for breach of our contractual obligations. Anyconfidence, such ~~action could have a material adverse effect on our results of operations, financial condition and reputation.~~

~~Such consequences could arise if, among other things,~~as the ~~following occur:~~

~~Improper performance of our services.~~ ~~The performance of clinical development services is complex and time-consuming. For example, we may make mistakes in conducting a clinical trial that could negatively impact or obviate the usefulness~~ultimate geographic spread of the ~~clinical trial or cause~~disease, the ~~results~~duration of the clinical trial to be reported improperly. If the clinical trial results are compromised, we could be subject to significant costs or liability, which could have an adverse impact on our ability to perform our services. As examples:

~~non-compliance generally could result~~outbreak, travel restrictions and social distancing in the ~~termination of ongoing clinical trials or sales and marketing projects or the disqualification of data for submission to regulatory authorities;~~

compromise of data from a particular clinical trial, such as failure to verify that informed consent was obtained from patients, could require us to repeat the clinical trial under the terms of our contract at no further cost to our client, but at a substantial cost to us; and

~~breach of a contractual term could result in liability for damages or termination of the contract.~~

While we endeavor to contractually limit our exposure to such risks, improper performance of our services could have an adverse effect on our financial condition, damage our reputation and result in the cancellation of current contracts by or failure to obtain future contracts from the affected client or other clients.

~~Investigation of clients.~~ From time to time, one or more of our clients are audited or investigated by regulatory authorities or enforcement agencies with respect to regulatory compliance of their clinical trials, programs or the marketing and sale of their drugs. In these situations, we have often provided services to our clients with respect to the clinical trials, programs or activities being audited or investigated, and we are called upon to respond to requests for information by the authorities and agencies. There is a risk that either our clients or regulatory authorities could claim that we performed our services improperly or that we are responsible for clinical trial or program compliance. If our clients or regulatory authorities make such claims against us and prove them, we could be subject to damages, fines or penalties. In addition, negative publicity regarding regulatory compliance of our clients’ clinical trials, programs or drugs could have an adverse effect on our business and reputation.

Security breaches and unauthorized use of our IT systems and information, or the IT systems or information in the possession of our vendors, could expose us, our clients, our data suppliers or others to risk of loss.

We rely upon the security of our computer and communications systems infrastructure to protect us from cyberattacks and unauthorized access. Cyberattacks can include malware, computer viruses, hacking or other significant disruption of our computer, communications and related systems. Although we take steps to manage and avoid these risks and to prevent their recurrence, our preventive and remedial actions may not be successful. Such attacks, whether successful or unsuccessful, could result in our incurring costs related to, for example, rebuilding internal systems, defending against litigation, responding to regulatory inquiries or actions, paying damages or fines, or taking other remedial steps with respect to third parties. Publicity about vulnerabilities and attempted or successful incursions could damage our reputation with clients and data suppliers and reduce demand for our services.

We also store proprietary and sensitive information in connection with our business, which could be compromised by a cyberattack. To the extent that any disruption or security breach results in a loss or damage to our data, an inappropriate disclosure of proprietary or sensitive information, an inability to access data sources, or an inability to process data or provide our offerings to our clients, it could cause significant damage to our reputation, affect our relationships with our data suppliers and clients (including loss of suppliers and clients), lead to claims against us and ultimately harm our business. We may be required to incur significant costs to alleviate, remedy or protect against damage caused by these disruptions or security breaches in the future. We may also face inquiry or increased scrutiny from government agencies as a result of any such disruption or breach. While we have insurance coverage for certain instances of a cyber security breach, our coverage may not be sufficient if we suffer a significant attack or multiple attacks. Any such breach or disruption could have a material adverse effect on our operating results and our reputation as a provider of mission-critical services.

Some of our vendors have significant responsibility for the security of certain of our data centers and computer-based platforms. Also, our data suppliers have responsibility for security of their own computer and communications environments. These third parties face risks relating to cyber security similar to ours, which could disrupt their businesses and therefore materially impact ours. Accordingly, we are subject to any flaw in or breaches to their computer and communications systems

~~or those that they operate for us, which could result in a material adverse effect on our business, operations and financial results.~~

~~Current and proposed laws and regulations regarding the protection of personal data could result in increased risks of liability or increased cost to us or could limit our service offerings.~~

The confidentiality, collection, use and disclosure of personal data, including clinical trial patient-specific information, are subject to governmental regulation generally in the country that the personal data were collected or used. For example, United States federal regulations under Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and as amended in 2014 by the Health Information Technology for Economic and Clinical Health (“HITECH”) Act, require individuals’ written authorization, in addition to any required informed consent, before Protected Health Information may be used for research. We are both directly and indirectly affected by the privacy provisions surrounding individual authorizations because many investigators with whom we are involved in clinical trials are directly subject to them as a HIPAA “covered entity” and because we obtain identifiable health information from third parties that are subject to such regulations. As there are some instances where we are a HIPAA “business associate” of a “covered entity,” we can also be directly liable for mishandling protected health information. Under HIPAA’s enforcement scheme, we can be subject to up to $1.5 million in annual civil penalties for each HIPAA violation.

In the EU personal data includes any information that relates to an identified or identifiable natural person with health information carrying additional obligations, including obtaining the explicit consent from the individual for collection, use or disclosure of the information. In addition, we are subject to EU rules with respect to cross-border transfers of such data out of the EU. The United States, the EU and its member states, and other countries, ~~where we have operations, such as Japan, South Korea, Malaysia,~~business closures or business disruptions, and the ~~Philippines, Russia~~effectiveness of actions taken in the United States and ~~Singapore, continue~~other countries to ~~issue new privacy~~contain and ~~data protection rules~~treat the disease.

Also, it may hamper our efforts to provide our investors with timely information and ~~regulations that relate to personal data and health information. Failure to~~ comply with ~~certain certification/registration~~our filing obligations with the Securities and annual re-certification/registration provisions associated with these data protection and privacy regulations and rules in various jurisdictions, or to resolve any serious privacy complaints, could subject us to regulatory sanctions, criminal prosecution or civil liability. Federal, state and foreign governments are contemplating or have proposed or adopted additional legislation governing the collection, possession, use or dissemination of personal data, such as personal health information, and personal financial data as well as security breach notification rules for loss or theft of such data. Additional legislation or regulation of this type might, among other things, require us to implement new security measures and processes or bring within the legislation other personal data, each of which may require substantial expenditures or limit our ability to offer some of our services. Additionally, if we violate applicable laws, regulations or duties relating to the use, privacy or security of personal data, we could be subject to civil liability or criminal prosecution, be forced to alter our business practices and suffer reputational harm.Exchange Commission.

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

~~Not applicable.~~On February 4, 2020, the Company issued an aggregate of 3 thousand shares (the “Exchange Shares”) of common stock to VenturEast to settle a $12 thousand liability.

The Exchange Shares are not registered under the Securities Act of 1933, as amended (the “Securities Act”) or any state securities laws. The Company has relied on the exemption from the registration requirements of the Securities Act by virtue of Section 3(a)(9) under the Securities Act.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

See the Index to Exhibits following the signature page hereto, which Index to Exhibits is incorporated herein by reference.

SIGNATURE

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.



						Cancer Genetics, Inc.
						(Registrant)

Date: ~~November 13, 2017~~						~~/s/ Panna L. Sharma~~
						~~Panna L. Sharma~~
						~~President and Chief Executive Officer~~ ~~(Principal Executive Officer)~~

~~Date: November 13, 2017~~June 24, 2020						/s/ John A. Roberts
						John A. Roberts
						President and Chief ~~Operating~~Executive Officer (Principal ~~Financial~~Executive Officer)

Date: ~~November 13, 2017~~June 24, 2020						/s/ ~~Igor Gitelman~~M. Glenn Miles
						~~Igor Gitelman~~M. Glenn Miles
						Chief ~~Accounting~~Financial Officer (Principal Financial and Accounting Officer)

INDEX TO EXHIBITS



Exhibit No.		Description

2.1***		Stock Purchase Agreement, dated as of August 14, 2017, by and among the Company, the Trustee of The Brandt Family Trust, Sabine Brandt, Royal Melbourne Institute of Technology, South Australian Life Science Advancement Partnership, LP, vivoPharm Pty Ltd. ACN 106 101 615, the Shareholders’ Representative party thereto, the Management Parties party thereto and certain other stockholders named therein (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on August 16, 2017).

~~4.1~~		Registration Rights Agreement, dated as of August 14, 2017, by and between the Company and Aspire Capital Fund, LLC (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on August 16, 2017).

~~10.1~~		Common Stock Purchase Agreement, dated as of August 14, 2017, by and between the Company and Aspire Capital Fund, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on August 16, 2017).

31.1		Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under The Securities Exchange Act of 1934, as amended * *

31.2		Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under The Securities Exchange Act of 1934, as amended * *

32.1		~~Certifications~~Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002

32.2		~~Certifications~~Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002

101		The following materials from the Registrant’s ~~quarterly report~~Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2017,~~March 31, 2020, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheet at ~~September 30, 2017~~March 31, 2020 (unaudited) and December 31, ~~2016,~~2019, (ii) Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss) for the three ~~and nine~~ month periods ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (unaudited), (iii) Condensed Consolidated Statements of Stockholders’ Equity for the three month periods ended March 31, 2020 and 2019 (unaudited), (iv) Condensed Consolidated Statements of Cash Flows for the ~~nine~~three month periods ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019 (unaudited) and ~~(iv)~~(v) Condensed Notes to Consolidated Financial Statements (unaudited)

*		Filed herewith.
**		Furnished herewith.
~~***~~		The schedules and exhibits to the Stock Purchase Agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K under the Securities Act of 1933, as amended. Cancer Genetics agrees to furnish as a supplement a copy of any omitted schedules or exhibits to the Stock Purchase Agreement to the Securities and Exchange Commission upon request, provided that Cancer Genetics may request confidential treatment for any schedule or exhibit so furnished.

3633



Cash	$	544
Accounts receivable	905
Lab supplies	1,258
Prepaid expenses and other current assets	101
Fixed assets	949
Intangible assets	7,014
Goodwill	2,129
Accounts payable and accrued expenses	(913		)
Deferred revenue	(814		)
Obligations under capital leases	(117		)
Total purchase price	$	11,056



	Three Months Ended September 30						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue	$	9,069		$	7,958		$	25,335		$	23,595
Net loss	(976		)	(3,919		)	(13,788		)	(13,596		)

Basic net loss per share	$	(0.04	)	$	(0.20	)	$	(0.61	)	$	(0.76	)
Diluted net loss per share	(0.16		)	(0.20		)	(0.61		)	(0.76		)



	September 30, 2017			December 31, 2016
Biopharma Services	$	3,702		$	3,683
Clinical Services	13,072			8,972
Discovery Services	1,300			480
Allowance for doubtful accounts	(2,277		)	(1,387		)
	$	15,797		$	11,748



Allowance for Doubtful Accounts (in thousands)
Balance, December 31, 2016	$	1,387
Bad debt expense	890
Balance, September 30, 2017	$	2,277



	September 30, 2017		December 31, 2016
SVB Term Note, repaid in 2017	$	—	$	4,667
PFG Term Note, net of discount of $865	5,135		—
Less unamortized debt issuance costs	199		13
Term notes, net	4,936		4,654
Less current maturities	—		2,000
Long-term portion	$	4,936	$	2,654



	Non-vested Restricted Stock Awards
	Number of Shares (in thousands)		Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2017	80		$	6.30
Granted	65		3.29
Vested	(30	)	8.30
Non-vested at September 30, 2017	115		$	4.09



2017 Debt	Issued During the Nine Months Ended September 30, 2017			As of September 30, 2017
Exercise price	$	2.82		$	2.82
Expected life (years)	7.00			6.48
Expected volatility	74.61		%	74.07		%
Risk-free interest rate	2.22		%	2.16		%
Expected dividend yield	—		%	—		%