UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 20172022

OR

For the transition period from _______________ to _______________

Commission File Number: 000-24249

Interpace Diagnostics Group, Inc.

(Exact name of registrant as specified in its charter)

Morris Corporate Center 1, Building CSecurities registered pursuant to Section 12(b) of the Act:

300 Interpace Parkway, Parsippany, NJ 07054

(Address of principal executive offices and zip code)

(855) 776-6419

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ] ☒ No☐

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

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

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

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

INTERPACE BIOSICENCES, INC.

INTERPACE DIAGNOSTICS GROUP, INC.

FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 20172022

TABLE OF CONTENTS

PART I -I. FINANCIAL INFORMATION

Item 1. Unaudited Interim Condensed Consolidated Financial StatementsINTERPACE BIOSCIENCES, INC.

INTERPACE DIAGNOSTICS GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

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

INTERPACE DIAGNOSTICS GROUP,BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSOPERATIONS

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

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

INTERPACE BIOSCIENCES, INC.

INTERPACE DIAGNOSTICS GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTSTATEMENTS OF STOCKHOLDERS’ EQUITYDEFICIT

(unaudited, in thousands)

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

INTERPACE DIAGNOSTICS GROUP,BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

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

INTERPACE BIOSCIENCES, INC.

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Tabular information in thousands, except per share amounts)

(unaudited)

Nature of Business

Interpace Biosciences, Inc. (“Interpace” or the “Company”) is a company that provides molecular diagnostics, bioinformatics and pathology services for evaluation of risk of cancer by leveraging the latest technology in personalized medicine for improved patient diagnosis and management. We develop and commercialize genomic tests and related first line assays principally focused on early detection of patients with indeterminate biopsies and at high risk of cancer using the latest technology.

COVID-19 pandemic

There continues to be widespread impact from the COVID-19 pandemic. Beginning in the first quarter of 2021, there has been a trend in many parts of the world of increasing availability and administration of vaccines against COVID-19, as well as an easing of restrictions on social, business, travel and government activities and functions. On the other hand, infection rates and regulations continue to fluctuate in various regions and there are ongoing global impacts resulting from the pandemic, including challenges and increases in costs for logistics and supply chains. We have also previously been affected by temporary laboratory closures, employment and compensation adjustments and impediments to administrative activities. The level and nature of the disruption caused by COVID-19 is unpredictable, may be cyclical and long-lasting and may vary from location to location.

In addition, we have experienced and are experiencing varying levels of inflation resulting in part from various supply chain disruptions, increased shipping and transportation costs, increased raw material and labor costs and other disruptions caused by the COVID-19 pandemic and general global economic conditions.

The continuing impact that the COVID-19 pandemic will have on our operations, including duration, severity and scope, remains highly uncertain and cannot be fully predicted at this time. While we believe we have generally recovered from the adverse impact that the COVID-19 pandemic had on our business during 2020, we believe that the COVID-19 pandemic could continue to adversely impact our results of operations, cash flows and financial condition in the future.

We continue to monitor the COVID-19 pandemic and the guidance that is being provided by relevant federal, state and local public health authorities and may take additional actions based upon their recommendations. It is possible that we may have to make adjustments to our operating plans in reaction to developments that are beyond our control.

The accompanying unaudited interim condensed consolidated financial statements and related notes (the “Interim Financial Statements”) should be read in conjunction with the consolidated financial statements of Interpace Diagnostics Group, Inc. (the “Company” or “Interpace”),the Company and its wholly-owned subsidiaries (Interpace Diagnostics Lab Inc., Interpace Diagnostics Corporation, Interpace Diagnostics Lab, Inc. and Interpace Diagnostics, LLC,LLC), and related notes as included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016,2021, as filed with the U.S. Securities and& Exchange Commission (“SEC”) on March 31, 2017,2022 and as amended on April 28, 2017.29, 2022.

The Interim Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The Interim Financial Statements include all normal recurring adjustments that, in the judgment of management, are necessary for a fair presentation of such interim financial statements. Discontinued operations include the Company’s wholly-ownedwholly owned subsidiaries: Group DCA, LLC, (“Group DCA”); InServe Support Solutions (“Pharmakon”);Solutions; and TVG, Inc. (“TVG”, dissolved December 31, 2014) and its Commercial Services Organization (“CSO”) business unit which was sold on December 22, 2015.2015 and its Interpace Pharma Solutions business (“Pharma Solutions”) which was sold on August 31, 2022. All significant intercompany balances and transactions have been eliminated in consolidation. Results of operations, cash flows and comprehensive incomeOperating results for the three and nine-month periodsperiod ended September 30, 20172022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2017.2022.

The accompanying condensed consolidated financial statements have been prepared on a basis that assumes that the Company will continue as a going concern whichand that contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. AsAccordingly, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of September 30, 2017,recorded asset amounts or amounts of liabilities that might result from the outcome of this uncertainty.

In October 2021, the Company had cashentered into a $7.5 million revolving credit facility with Comerica Incorporated (“Comerica”)(the “Comerica Loan Agreement”). See Note 18, Revolving Line of Credit, for more details. Also in October 2021, the Company entered into an $8.0 million term loan with BroadOak Fund V, L.P. (“BroadOak”)(the “BroadOak Term Loan”), the proceeds of which were used to repay in full at their maturity the existing secured promissory note with Ampersand Capital Partners (“Ampersand”) (the “Ampersand Note”) and cash equivalents1315 Capital II, L.P (“1315 Capital”)(the “1315 Capital Note”). In May 2022, the Company entered into a Subordinated Convertible Promissory Note agreement with BroadOak for an additional $2.0 million (the “Convertible Note”), which was converted into a subordinated term loan and was added to the outstanding BroadOak Term Loan balance. See Note 14, Notes Payable, for more details.

In January 2022, the Company’s registration statement for a rights offering filed with the Securities and Exchange Commission (SEC) became effective; however, the rights offering was subsequently terminated later in January 2022 when the Company announced that the Centers for Medicare & Medicaid Services, or CMS, issued a new billing policy whereby CMS will no longer reimburse for the use of $11.7the Company’s ThyGeNEXT^® and ThyraMIR^® tests when billed together by the same provider/supplier for the same beneficiary on the same date of service. However, on February 28, 2022, the Company announced that the National Correct Coding Initiative (NCCI) program issued a response on behalf of CMS stating that the January 2022 billing policy reimbursement change for ThyGeNEXT^® (0245U) and ThyraMIR^® (0018U) tests has been retroactively reversed to January 1, 2022. In May 2022, the Company was notified by CMS/NCCI that processing of claims for dates of service after January 1, 2022 would be completed beginning July 1, 2022. However, on June 9, 2022, the Company was notified that Novitas re-priced ThyGeNEXT^® (0245U) from $2,919 to $806.59 retroactively effective to January 1, 2022. On July 20, 2022 the Clinical Diagnostic Laboratory Tests (CDLT) Advisory Panel affirmed a gapfill price for ThyGeNEXT^® of $806.59. As a result of the ThyGeNEXT^® pricing change, the Company reduced its net realizable value, or NRV rates, for ThyGeNEXT^® Medicare billing to reflect the $806.59 pricing for tests performed during the second quarter of 2022. In addition, in order to reflect the retroactive pricing change to January 1, 2022, the Company recorded an NRV adjustment of $0.7 million net accounts receivableduring the second quarter of $2.8 million,2022 to reduce revenue recorded during the first quarter of 2022. During July 2022, the Company began implementing cost-savings initiatives including a reduction in headcount and incidental expenses and a freeze on all non-essential travel and hiring.

On August 31, 2022, the Company closed on the sale of its Pharma Solutions business for a total current assetspurchase price of $15.8 million and total current liabilities$7,000,000 ($500,000 of $8.3 million. which has been deposited into escrow), subject to a potential post-closing working capital adjustment, In addition, we received the earnout payment of $1,043,000. See Note 4,

Discontinued Operations.

For the nine months ended September 30, 2017, the Company2022, we had a netan operating loss from continuing operations of $7.2 million and cash used in operating activities was $12.9$3.7 million.

During the nine months ended September 30, 2017, the Company closed on four equity offerings raising gross proceeds of $27.9 million. The details are as follows:

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

(unaudited) 

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

(unaudited)

Subsequent to September 2017 the Company received approximately $6.2 million from the exercise of BaseWarrants issued as part of the Offering, as follows:

As part of our acquisition of RedPath Integrated Pathology, Inc., we issued a non-negotiable subordinated secured, non-interest bearing, promissory note, dated as of October 31, 2014, with an aggregate principal amount of $10.7 million outstanding (the “RedPath Note”). In December 2016 we repaid $1.33 million in principal of the RedPath Note resulting in an outstanding balance of $9.34 million. The RedPath Note was subsequently acquired by a single institutional investor (the “Investor”) for $8.87 million on March 22, 2017. Also on that date we and the Investor exchanged the RedPath Note for a senior secured convertible note in the aggregate principal amount of $5.32 million and a senior secured non-convertible note in the aggregate principal amount of $3.55 million. On April 18, 2017, we and the Investor exchanged the senior secured non-convertible note for $3.55 million of our senior secured convertible note. Between March 23, 2017 and April 18, 2017, the senior secured convertible notes were converted in full for 3,795,429 shares of our common stock. We no longer have any outstanding secured debt, and any security interests and liens related to our former secured debt have been fully settled.

The Company entered into a Credit Agreement with SCM Specialty Finance Opportunities Fund, L.P. (the “Credit Agreement”) on September 28, 2016 for $1.2 million. The Credit Agreement contains customary representations and warranties in favor of the Lender and certain covenants, including, among other things, financial covenants relating to loan turnover rates, liquidity and revenue targets. As of September 30, 2017 the Company is renegotiating terms2022, we had cash and cash equivalents of the Credit Agreement$6.3 million, total current assets of $12.7 million and hascurrent liabilities of $14.8 million. As of November 4, 2022, we had approximately $6.6 million of cash on hand, excluding restricted cash.

We will not borrowed any funds under the Credit Agreement.

While the Company has significantly increased its cash balance and has eliminated its long term indebtedness, the Company does not expect to generate positive cash flows from operations for the year ending December 31, 2017. The Company intends2022. We intend to meet itsour ongoing capital needs by revenue growth, containing costs, entering into strategic alliancesusing our available cash and availability under the Comerica Loan Agreement, as well as exploringthrough targeted margin improvement; collection of accounts receivable; containment of costs; and the potential use of other financing options and other strategic alternatives. However, if we are unable to meet the financial covenants under the Comerica Loan Agreement, the revolving line of credit and notes payable will become due and payable immediately.

We continue to explore various strategic alternatives, dilutive and non-dilutive sources of funding, including equity and debt financings, strategic alliances, business development and other sources in order to provide additional liquidity. With the delisting of our common stock from Nasdaq in February 2021, our ability to raise additional capital on terms acceptable to us has been adversely impacted. There can be no assurance that we will be successful in obtaining such funding on terms acceptable to us.

Our consolidated financial statements assume we will continue as a going concern. Our ability to continue as a going concern depends on having working capital for vendor payments, meeting short-term obligations on other accrued liabilities, and amongst other requirements, making interest payments on our debt obligations. Without positive operating margins and sufficient working capital and the ability to meet our debt obligations, our business will be jeopardized and we may not be able to continue in our current structure, if at all. Under these circumstances, we would likely have to consider other options, including the possibility ofsuch as selling assets, raising additional debt or equity capital, cutting costs or otherwise reducing our cash requirements, or negotiating with our creditors to restructure our applicable obligations. With the proceeds received from the sale of the Pharma Solutions business, as necessary. There is, however, no assurancewell as the expected improvement in future operating cash flows associated with the disposition, as of the date of this filing, the Company anticipates that current cash and cash equivalents, available eligible borrowings on its Comerica Loan Agreement and forecasted cash receipts will be successfulsufficient to meet its anticipated cash requirements through the next twelve months.

Further, along with many laboratories, we may be affected by the Proposed Local Coverage Determination (“LCD”) DL39365, which was posted on June 9, 2022 and is currently under consideration by our local Medicare Administrative Contractor, Novitas Solutions, Inc. If finalized, this Proposed LCD, which governs “Genetic Testing for Oncology,” could impact the existing LCD for one of our molecular tests, PancraGEN^®. If Novitas restricts coverage for PancraGEN^®, our liquidity could be negatively impacted beginning in meetingFiscal 2023.

The Company anticipates that current cash and cash equivalents and forecasted cash receipts would still be sufficient to meet its capitalanticipated cash requirements priorthrough the next twelve months, from the date of this filing.

On August 31, 2022, the Company and Interpace Pharma Solutions, Inc. (the “Subsidiary”, and together with the Company as used in this Note 4, “Interpace”) entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Flagship Biosciences, Inc. (the “Purchaser”) pursuant to becoming cash flow positive.which the Purchaser agreed to (i) acquire substantially all of the assets of the Subsidiary used in Subsidiary’s business of complex molecular analysis for the early diagnosis and treatment of cancer and supporting the development of targeted therapeutics (the “Business”) and (ii) assume and pay certain liabilities related to the purchased assets as set forth in the Purchase Agreement (collectively, the “Transaction”). The Transaction closed on August 31, 2022.

INTERPACE DIAGNOSTICS GROUP, INC.As consideration for the Transaction, under the Purchase Agreement, Interpace received a total purchase price of approximately $7.0 million ($0.5 million of which has been deposited into escrow), subject to a potential post-closing working capital adjustment, and the assumption by the Purchaser of certain specified liabilities. In addition, subject to the terms and conditions set forth in the Purchase Agreement, Purchaser will pay the Subsidiary an earnout of up to $2.0 million based on revenue for the period beginning September 1, 2021 and ending August 31, 2022. The Company received an earnout payment of approximately $1.0 million in September 2022 which is the fully settled amount and there will be no further earnout payments in the future.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular informationThe Purchase Agreement includes a one-year commitment of Interpace not to compete with the Business, recruit or hire any former employees of the Subsidiary who accept employment with the Purchaser in thousands, except per share amounts)connection with the Transaction, or divert or attempt to divert from Purchaser any business to be performed from any of the contracts or agreements with customers as set forth in the Purchase Agreement. The Purchase Agreement also contains customary representations and warranties, post-closing covenants and mutual indemnification obligations for, among other things, any inaccuracy or breach of any representation or warranty and any breach or non-fulfillment of any covenant.

(unaudited)

In connection with the Transaction, on August 31, 2022, Interpace and Purchaser entered into a Shared Services Agreement (the “Shared Services Agreement”) pursuant to which Interpace agreed to provide, or cause its affiliates to provide, to the Purchaser certain services set forth in the Shared Services Agreement on a transitional basis and subject to the terms and conditions set forth in the Shared Services Agreement (the “Services”). As consideration for the Services provided by Interpace, Purchaser will pay Interpace the amounts specified for each Service as set forth in the Shared Services Agreement. The Company’s obligations to provide the Services will terminate with respect to each Service as set forth in the Shared Services Agreement.

The Purchaser is identified as a related party as an affiliate of Ampersand and an affiliate of BroadOak have each provided equity financing to the Purchaser, collectively own a majority of the Purchaser’s outstanding equity securities and are represented on its Board of Directors.

The Company intends to use the remaining net proceeds to fund its future business activities and for general working capital purposes. As a result of the sale, the gain on sale and all operations from Interpace Pharma Solutions have been classified as discontinued operations for all periods presented.

A reconciliation of the accounting for the Company’s Pharma Solutions business is as follows:

SCHEDULE OF SALE OF BUSINESS

The components of liabilities classified as discontinued operations consist of the following as of September 30, 2022 and December 31, 2021:

SCHEDULE OF COMPONENTS OF LIABILITIES AND REVENUE CLASSIFIED AS DISCONTINUED OPERATIONS

The table below presents the significant components of its former Pharma Solutions business unit’s results included within loss from discontinued operations, net of tax in the condensed consolidated statements of operations for the three-and nine-months ended September 30, 2022 and 2021.

The income tax benefit for the three months ended September 30, 2022 pertained to the reversal of a credit as a result of the Pharma Solutions sale. The income tax expense for both the three months ended September 30, 2021 and the nine months ended September 30, 2022 and 2021 pertained to interest accrued on uncertain tax position liabilities.

Cash used from discontinued operations, operating activities, for the nine months ended September 30, 2022 was approximately $2.8 million. There was cash provided by discontinued operations, investing activities, for the nine months ended September 30, 2022 of $7.3 million which pertained to the net proceeds received from the Pharma Solutions sale. Cash used from discontinued operations, operating activities, for the nine months ended September 30, 2021 was approximately $3.9 million. There was cash used from discontinued operations, investing activities, for the nine months ended September 30, 2021 of $0.1 million.

Accounting Estimates

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

Revenue Recognition

ThroughWe derive our revenues from the performance of proprietary assays or tests. The Company’s molecular diagnostics business,performance obligation is fulfilled upon the completion, review and release of test results to the customer. The Company subsequently bills third-party payers or direct-bill payers for the tests performed. Under Accounting Standards Codification 606, revenue is recognized based on the estimated transaction price or net realizable value, which is determined based on historical collection rates by each payer category for each proprietary test offered by the Company. To the extent the transaction price includes variable consideration, for all third party and direct-bill payers and proprietary tests, the Company aims to provide physicians and patients with diagnostic options for detecting genetic and other molecular alterationsestimates the amount of variable consideration that are associated with gastrointestinal, endocrine and lung cancers, which are principally focused on early detection of patients at high risk of cancer. Customersshould be included in the Company’s molecular diagnostics business consist primarilytransaction price using the expected value method based on historical experience.

We regularly review the ultimate amounts received from the third-party and direct-bill payers and related estimated reimbursement rates and adjust the NRV’s and related contractual allowances accordingly. If actual collections and related NRV’s vary significantly from our estimates, we will adjust the estimates of physicians, hospitalscontractual allowances, which affects net revenue in the period such variances become known. The Company recorded an NRV adjustment of $0.7 million as a reduction of revenue during the second quarter of 2022 to record the impact on revenue recorded during the first quarter of 2022. See Note 3, Going Concern, for more details.

For our pharma services, project level activities, including study setup and clinics. Under current GAAP, we recognize revenue from services renderedproject management, are satisfied over the life of the contract while performance-related obligations are satisfied at a point in time as the Company processes samples delivered by the customer. Revenues are recognized at a point in time when the following four revenue recognition criteriatest results or other deliverables are met: persuasive evidence of an arrangementreported to the customer.

Financing and Payment

For non-Medicare claims, our payment terms vary by payer category. Payment terms for direct-payers in our clinical services are typically thirty days and in our pharma services, up to sixty days. Commercial third-party-payers are required to respond to a claim within a time period established by their respective state regulations, generally between thirty to sixty days. However, payment for commercial third-party claims may be subject to a denial and appeal process, which could take up to two years in some instances where multiple appeals are submitted. The Company generally appeals all denials from commercial third-party payers. We bill Medicare directly for tests performed for Medicare patients and must accept Medicare’s fee schedule for the covered tests as payment in full.

Costs to Obtain or contract exists; servicesFulfill a Customer Contract

Sales commissions are expensed in the period in which they have been rendered;earned. These costs are recorded in sales and marketing expense in the selling price is fixed or determinable; and collectability is reasonably assured. condensed consolidated statements of operations.

Accounts Receivable

The Company’s accounts receivable represent unconditional rights to consideration and are generated using its clinical services and pharma services. The Company’s clinical services are generally considered renderedfulfilled upon completion of the test, and review and release of the test results, at which timeresults. In conjunction with fulfilling these services, the Company bills the third-party payer or hospital. We recognize revenue on an accrual basis when we are able to make a reasonable estimate of reimbursement at the time delivery is complete. In the first period in which revenue is accrued for a particular payer or test, there generally is a one-time increase in revenue. Until we have contracts with payers or can reasonably estimate the amount that will ultimately be received, we recognize the related revenue on the cash basis. Because the timing and amount of cash payments received from payers as well as one-time increases in revenue from newly accrued payers are difficult to predict, we expect that our revenue may fluctuate significantly in any given quarter.

The Company currently recognizes revenue and accounts receivable related to billings for Medicare and Medicare Advantage, on an accrual basis, net of contractual adjustment, as well as for hospitals (direct-bill clients), when collectability is reasonably assured.direct-bill payer. Contractual adjustments represent the difference between the list prices and the reimbursement raterates set by third-party payers, including Medicare, commercial payers, and Medicare Advantage, or the amounts billed to hospitals.direct-bill payers. Specific accounts may be written off after several appeals, which in some cases may take longer than twelve months.

Specifically by test, PancraGEN® revenues have been recorded on the accrual basis in each of these categories since its acquisition in 2014. ThyGenX^® has been recorded on an accrual basis since its Medicare approval in 2015 in two of the payer categories, Medicare and Medicare Advantage, and ThyraMIR®, a newer test, approved for Medicare in 2016, has been moved from cash basis to accrual basis in the same categories as ThyGenX, Medicare and Medicare Advantage in 2017, effective in the current quarter. As of September 30, 2017 there are no revenues for the Company’s lung assay called RespriDX™.

INTERPACE DIAGNOSTICS GROUP, INC.Leases

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

(unaudited)

The Company alsodetermines if an arrangement contains a lease in whole or in part at the inception of the contract. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. All leases with terms greater than twelve months result in the recognition of a ROU asset and a liability at the lease commencement date based on the present value of the lease payments over the lease term. Unless a lease provides services by wayall of commercial insurance carriers or governmental programs that may or may not have a contract or coverage in place for its proprietary tests. As contracts and coverage progress for payers in these categories, the Company will evaluate their collection historyinformation required to determine the appropriate time to begin to recognized specific payers on the accrual basis as well. Currently, all are recognized on the cash basis. The Company does not enter into direct agreements with patients that commit them to pay any portion of the cost of the tests in the event that their commercial insurance carrier or governmental program does not pay the Company for its services; however, the Company does offer patients that do not have adequate insurance coverage the opportunity to pay cash forimplicit interest rate, we use our services at a reduced rate.

Accounts Receivable

The Company recognizes Accounts Receivable as revenue is accrued, based upon its criteria for revenue recognition. The Company also records an Allowance for Doubtful Accountsincremental borrowing rate based on the collection history for its accrualinformation available at the commencement date in determining the present value of the lease payments. We use the implicit interest rate in the lease when readily determinable.

Our lease terms include all non-cancelable periods and may include options to extend (or to not terminate) the lease when it is reasonably certain that we will exercise that option. Leases with terms of twelve months or less at the commencement date are expensed on a straight-line basis payer. For non-paying roster accounts, balances are generally written off after twelve months. Medicareover the lease term and Medicare Advantage accounts are currently written off after eighteen months to allow fordo not result in the appeal process, which in some cases requires several appeals prior to collection.recognition of an asset or liability. See Note 8, Leases.

Other Current Assets

Other current assets consisted of the following as of September 30, 20172022 and December 31, 2016:2021:

SCHEDULE OF OTHER CURRENT ASSETS

Long-Lived Assets, including Finite-Lived Intangible Assets

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

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

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

(unaudited)

Discontinued Operations

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

Basic and Diluted (Loss) IncomeNet Loss per Share

A reconciliation of the number of shares of common stock, par value $0.01 per share, used in the calculation of basic and diluted (loss) incomeloss per share for the three- and nine-month periods ended September 30, 20172022 and 20162021 is as follows:

SCHEDULE OF BASIC AND DILUTED NET LOSS PER SHARE

The Company’s Series B Convertible Preferred Stock, on an as converted basis into common stock of 7,833,334 shares for the three- and nine-months ended September 30, 2022, and the following outstanding stock-based awards and warrants, were excluded from the computation of the effect of dilutive securities on (loss) incomeloss per share for the following periods becauseas they would have been anti-dilutive:anti-dilutive (rounded to thousands):

SCHEDULE OF ANTI-DILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE

INTERPACE DIAGNOSTICS GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Tabular information in thousands, except per share amounts)

(unaudited)

Goodwill was attributable to the acquisition of our Pharma Solutions business in July 2019. The original carrying value of the intangible assets acquired was $15.6 million, with goodwill of approximately $8.3 million and identifiable intangible assets of approximately $7.3 million recorded upon acquisition. With the sale of Pharma Solutions, the goodwill balance at September 30, 2022 was written down to zero as well as the intangible assets associated with the original acquisition. The net carrying value of the identifiable intangible assets from all acquisitions within continuing operations as of September 30, 20172022 and December 31, 20162021 are as follows:

SCHEDULE OF IDENTIFIABLE INTANGIBLE ASSETS CARRYING VALUE

Amortization expense from continuing operations was approximately $0.8$0.3 million and $1.0$0.9 million for the three-month periods ended September 30, 20172022 and 2016, respectively,2021, and approximately $2.4 $1.0 million and $2.9$2.7 million for the nine-month periods ended September 30, 20172022 and 2016,2021, respectively. Amortization of our diagnostic assets begins upon launch of the product. Estimated future amortization expense for the next five yearsremainder of 2022 and thereafter is as follows, based on current assumptionsfollows:

SCHEDULE OF FUTURE ESTIMATED AMORTIZATION EXPENSE