Document_And_Entity_Informatio
Document And Entity Information | 3 Months Ended | |
Mar. 31, 2014 | 9-May-14 | |
Document Information [Line Items] | ' | ' |
Entity Registrant Name | 'RESPONSE GENETICS INC | ' |
Entity Central Index Key | '0001124608 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 38,732,896 |
Document Type | '10-Q | ' |
Amendment Flag | 'false | ' |
Document Period End Date | 31-Mar-14 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
Document Fiscal Year Focus | '2014 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Current assets | ' | ' |
Cash and cash equivalents | $4,956,503 | $8,148,599 |
Accounts receivable, net of allowance for doubtful accounts of $2,404,659 and $1,751,567 at December 31, 2013 and March 31, 2014, respectively. | 5,528,509 | 6,225,923 |
Prepaid expenses and other current assets | 1,333,776 | 981,908 |
Total current assets | 11,818,788 | 15,356,430 |
Property and equipment, net | 1,766,657 | 1,934,582 |
Intangible assets, net | 772,824 | 767,223 |
Total assets | 14,358,269 | 18,058,235 |
Current liabilities | ' | ' |
Accounts payable | 1,383,898 | 1,694,312 |
Accrued expenses | 517,291 | 666,675 |
Accrued royalties | 1,349,051 | 1,293,717 |
Accrued payroll and related liabilities | 1,927,616 | 1,850,923 |
Capital lease obligation, current portion | 129,456 | 157,238 |
Line of credit, current | 1,000,000 | 0 |
Total current liabilities | 6,307,312 | 5,662,865 |
Capital lease obligation, net of current portion | 116,157 | 136,419 |
Line of credit, non-current | 0 | 1,000,000 |
Total liabilities | 6,423,469 | 6,799,284 |
Commitments and contingencies (Note 5) | ' | ' |
Common stock classified outside of stockholders’ equity | 5,500,000 | 5,500,000 |
Stockholders’ equity | ' | ' |
Common stock, $0.01 par value; 50,000,000 shares authorized; 38,712,896 and 38,728,196 shares issued and outstanding at December 31, 2013 and March 31, 2014, respectively | 337,338 | 337,185 |
Additional paid-in capital | 71,188,770 | 70,986,406 |
Accumulated deficit | -68,801,618 | -65,297,179 |
Accumulated other comprehensive loss | -289,690 | -267,461 |
Total stockholders’ equity | 2,434,800 | 5,758,951 |
Total liabilities, common stock classified outside of stockholders’ equity and stockholders’ equity | $14,358,269 | $18,058,235 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Allowance for doubtful accounts | $1,751,567 | $2,404,659 |
Common stock, par value per share | $0.01 | $0.01 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 38,728,196 | 38,712,896 |
Common stock, shares outstanding | 38,728,196 | 38,712,896 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Net revenue | $3,894,934 | $5,624,191 |
Cost of revenue | 2,438,376 | 2,533,722 |
Gross Profit | 1,456,558 | 3,090,469 |
Operating expenses: | ' | ' |
Selling and marketing | 1,452,905 | 1,442,235 |
General and administrative | 3,013,898 | 2,135,186 |
Research and development | 467,567 | 297,200 |
Total operating expenses | 4,934,370 | 3,874,621 |
Operating loss | -3,477,812 | -784,152 |
Other income (expense): | ' | ' |
Interest expense | -24,221 | -19,410 |
Interest income | 1 | 43 |
Other | -2,407 | -20,785 |
Net loss | -3,504,439 | -824,304 |
Unrealized loss on foreign currency translation | -22,229 | -1,853 |
Comprehensive loss | ($3,526,668) | ($826,157) |
Net loss per share — basic and diluted (in dollars per share) | ($0.09) | ($0.03) |
Weighted-average shares — basic and diluted (in shares) | 38,718,336 | 32,797,625 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Cash flows from operating activities: | ' | ' |
Net loss | ($3,504,439) | ($824,304) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' |
Depreciation and amortization | 206,884 | 137,399 |
Share-based compensation | 184,769 | 105,324 |
Bad debt expense | 1,293,850 | 468,463 |
Changes in operating assets and liabilities: | ' | ' |
Accounts receivable | -596,437 | -364,991 |
Prepaid expenses and other current assets | -351,868 | -477,748 |
Accounts payable | -310,414 | -292,303 |
Accrued expenses | -149,384 | 378,951 |
Accrued royalties | 55,334 | 194,250 |
Accrued payroll and related liabilities | 76,693 | 277,718 |
Deferred revenue | 0 | -483,052 |
Net cash used in operating activities | -3,095,012 | -880,293 |
Cash flows from investing activities: | ' | ' |
Purchases of property and equipment | -30,040 | -81,414 |
Purchases of software | -14,519 | -4,400 |
Net cash used in investing activities | -44,559 | -85,814 |
Cash flows from financing activities: | ' | ' |
Proceeds from exercise of stock options | 17,748 | 0 |
Capital lease payments | -48,044 | -39,208 |
Net cash used in financing activities | -30,296 | -39,208 |
Effect of foreign exchange rates on cash and cash equivalents | -22,229 | -1,853 |
Net decrease in cash and cash equivalents | -3,192,096 | -1,007,168 |
Cash and cash equivalents: | ' | ' |
Beginning of period | 8,148,599 | 9,041,478 |
End of period | 4,956,503 | 8,034,310 |
Cash paid during the period for: | ' | ' |
Interest | $24,221 | $19,410 |
Organization_Operations_and_Ba
Organization, Operations and Basis of Accounting | 3 Months Ended |
Mar. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
Organization, Operations and Basis of Accounting | ' |
1. Organization, Operations and Basis of Accounting | |
Response Genetics, Inc. (the “Company”) was incorporated in the State of Delaware on September 23, 1999 as Bio Type, Inc. for the purpose of providing molecular profiling services of tumor tissue that has been formalin-fixed and embedded in paraffin. In August 2000, the Company changed its name to Response Genetics, Inc. | |
The Company is a life science company engaged in the research, development, marketing and sale of pharmacogenomics-clinical diagnostic tests for cancer. Pharmacogenomics is the science of how an individual’s genetic makeup relates to drug response. Diagnostic tests based on pharmacogenomics facilitate the prediction of a response to drug therapy or survival following surgery based on an individual’s genetic makeup. In order to generate pharmacogenomic information from patient specimens for these tests, the Company uses its proprietary technologies that enable the Company to reliably and consistently extract ribonucleic acid (“RNA”) and deoxyribonucleic acid (“DNA”) from tumor specimens that are stored as formalin-fixed and paraffin-embedded (“FFPE”) specimens and, thereby to analyze genetic information contained in these tissues for each patient. The Company’s platforms include analysis of single biomarkers using the polymerase chain reaction method as well as global gene interrogation using microarray methods and fluorescence in situ hybridization (“FISH”) from paraffin or frozen tissue specimens. The Company primarily derives its revenue from the sale of its ResponseDX® diagnostic testing products and by providing pharmacogenomic clinical trial testing services to pharmaceutical companies in the United States, Asia and Europe. | |
The Company’s goal is to provide cancer patients and their physicians with a means to make informed, individualized treatment decisions based on genetic analysis of tumor tissues. The Company’s pharmacogenomic analysis of clinical trial specimens for the pharmaceutical industry may provide data that will lead to a better understanding of the molecular basis for response to specific drugs and, therefore lead to individualized treatment. | |
Liquidity and Management’s Plans | |
Since its inception, the Company has devoted substantial effort in developing its products and has incurred losses and negative cash flows from operations. At March 31, 2014, the Company had an accumulated deficit of $68,801,618. The Company anticipates continued losses and negative cash flows as it funds its selling and marketing activities and research and development programs. | |
The Company’s current operating plan includes various assumptions concerning the level and timing of cash receipts from sales and cash outlays for operating expenses and capital expenditures. The Company’s ability to successfully carry out its business plan is primarily dependent upon its ability to (1) obtain sufficient additional capital at acceptable costs, (2) attract and retain knowledgeable employees, and (3) generate significant revenues. At this time, the Company expects to satisfy its future cash needs primarily through additional financing and/or strategic investments. The Company is currently seeking such additional financing and/or strategic investments; however, there can be no assurance that any additional financing or strategic investments will be available on acceptable terms, if at all. If the Company is unable to timely and successfully raise additional capital and/or achieve profitability, it will not have sufficient capital resources to implement its business plan or continue its operations, and the Company will most likely be required to reduce certain discretionary spending and/or curtail operations, which could have a material adverse effect on the Company’s ability to achieve its intended business objectives. No adjustments have been made to the accompanying unaudited condensed consolidated financial statements to reflect any of the matters discussed above. The unaudited condensed consolidated financial statements have been prepared on the basis that the Company will continue as a going concern. | |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q promulgated by the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for interim periods are not necessarily indicative of the results that may be expected for the fiscal year. The balances as of December 31, 2013 were derived from our audited financial statements as of December 31, 2013. The financial statements should be read in conjunction with the Company’s audited December 31, 2013 and 2012 consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K previously filed with the SEC on March 31, 2014. | |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 3 Months Ended | ||||||||||||||
Mar. 31, 2014 | |||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||
Summary of Significant Accounting Policies | ' | ||||||||||||||
2. Summary of Significant Accounting Policies | |||||||||||||||
Basis of Consolidation | |||||||||||||||
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Response Genetics, Ltd., a Scottish corporation (the “Subsidiary”), which was incorporated in November 2006. The Subsidiary had no employees or active operations in 2013 or to date in 2014. All significant intercompany transactions and balances have been eliminated in consolidation. | |||||||||||||||
Cash and Cash Equivalents | |||||||||||||||
The Company considers all highly liquid investments with a maturity date of three months or less from the date of purchase to be cash equivalents. The carrying value of cash equivalents approximates fair value due to the short-term nature and liquidity of these instruments. The Company’s cash equivalents are comprised of cash on hand, deposits in banks and money market investments. | |||||||||||||||
Accounts Receivable | |||||||||||||||
Pharmaceutical Accounts Receivable | |||||||||||||||
The Company invoices its clients as specimens are processed and any other contractual obligations are met. The Company’s contracts with clients typically require payment within 45 days of the date of invoice. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its clients to make required payments. The Company specifically analyzes accounts receivable and historical bad debts, client credit, current economic trends and changes in client payment trends when evaluating the adequacy of the allowance for doubtful accounts. Account balances are charged-off against the allowance when it is probable the receivable will not be recovered. To date, the Company’s pharmaceutical customers have primarily been large pharmaceutical companies. As a result, bad debts from pharmaceutical accounts receivable to date have been minimal. Pharmaceutical company accounts receivable as of December 31, 2013 and March 31, 2014 were $1,892,384 and $892,162, respectively. There were no allowances for doubtful accounts recorded against these pharmaceutical accounts receivable at December 31, 2013 and March 31, 2014. | |||||||||||||||
ResponseDX® Accounts Receivable | |||||||||||||||
ResponseDX® accounts receivable are recorded from two primary payors: (1) Medicare and (2) third party payors such as commercial insurance and private payors or self-paying payors (“Private Payors”). ResponseDX® accounts receivable are recorded at established billing rates less an estimated billing adjustment, based on reporting models utilizing historical cash collection percentages and updated for current effective reimbursement factors. Management performs ongoing valuations of accounts receivable balances based on management’s evaluation of historical collection experience and industry trends. Based on the historical experience for our Medicare and Private Payor accounts, management has determined, based on a detailed analysis, that accounts receivable associated with certain billings are unlikely to be collected. Therefore, the Company has recorded an allowance for doubtful accounts of $2,404,659 and $ 1,751,567 as of December 31, 2013 and March 31, 2014, respectively. The Company’s bad debt expense for the three months ended March 31, 2013 and 2014 was $468,463 and $1,293,850, respectively. | |||||||||||||||
ResponseDX ® accounts receivable as of December 31, 2013 and March 31, 2014, consisted of the following: | |||||||||||||||
December 31, | March 31, | ||||||||||||||
2013 | 2014 | ||||||||||||||
(Unaudited) | |||||||||||||||
Net Medicare receivable | $ | 2,422,611 | $ | 2,223,793 | |||||||||||
Net Private Payor receivable | 4,315,587 | 4,164,121 | |||||||||||||
6,738,198 | 6,387,914 | ||||||||||||||
Allowance for doubtful accounts | -2,404,659 | -1,751,567 | |||||||||||||
Total | $ | 4,333,539 | $ | 4,636,347 | |||||||||||
Property and Equipment | |||||||||||||||
Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the double declining balance and straight-line methods over the estimated useful lives of the assets. The Company has determined the estimated useful lives of its property and equipment, as follows: | |||||||||||||||
Laboratory equipment | 5 to 7 years | ||||||||||||||
Furniture and equipment | 3 to 7 years | ||||||||||||||
Leasehold improvements | Shorter of the useful life (5 to 7 years) or the lease term | ||||||||||||||
Maintenance and repairs are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the related accounts and the resulting gain or loss is reflected in the statements of operations. | |||||||||||||||
Intangible Assets | |||||||||||||||
Intangible assets are carried at the cost to obtain them. Purchased software and internally-developed intangible assets are amortized using the straight-line method over estimated useful lives of three to five years. The Company has capitalized costs related to the development of database software (see Note 3). The portion of this database placed into service is amortized in accordance with ASC 350-40, Internal-Use Software. The amortization period is five years using the straight-line method. | |||||||||||||||
Revenue Recognition | |||||||||||||||
Pharmaceutical Revenue | |||||||||||||||
Revenues that are derived from testing services provided to pharmaceutical companies are recognized on a contract specific basis pursuant to the terms of the related agreements. Revenue is recognized in accordance with ASC 605, Revenue Recognition, which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred and title and the risks and rewards of ownership have been transferred to the client or services have been rendered; (3) the price is fixed or determinable; and (4) collectability is reasonably assured. | |||||||||||||||
Revenues are recorded on an accrual basis as the contractual obligations are completed and as a set of assays is processed through the Company’s laboratory under a specified contractual protocol and are recorded on the date the tests are completed. Certain contracts have minimum assay requirements that, if not met, result in payments that are due upon the completion of the designated period. In these cases, revenues are recognized when the end of the specified contract period is reached. | |||||||||||||||
On occasion, the Company may enter into a contract that requires the client to provide an advance payment for specimens that will be processed at a later date. In these cases, the Company records this advance as deferred revenue and recognizes the revenue as the specimens are processed or at the end of the contract period, as appropriate. | |||||||||||||||
The Company recorded revenue from pharmaceutical clients of $2,441,693 and $577,381 for the three months ended March 31, 2013 and 2014, respectively. | |||||||||||||||
ResponseDX® Revenue | |||||||||||||||
Revenues that are derived from ResponseDX® testing services are recognized in accordance with ASC 605, Revenue Recognition, which requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred and title and the risks and rewards of ownership have been transferred to the client or services have been rendered; (3) the price is fixed or determinable; and (4) collectability is reasonably assured. We record revenues when our tests have confirmed results, which are evidence that the services have been performed. | |||||||||||||||
Revenues are recorded on an accrual basis as the contractual obligations are completed and as a set of assays is processed through our laboratory under a specified contractual protocol. | |||||||||||||||
ResponseDX® Private Payor and Medicare revenues are recorded at established billing rates less an estimated billing adjustment, based on reporting models utilizing historical cash collection percentages and updated for current effective reimbursement factors. The Company’s Medicare provider number allows it to invoice and collect from Medicare. The Company’s invoicing to Medicare is primarily based on amounts allowed by Medicare for the service provided as defined by Common Procedural Terminology (“CPT”). | |||||||||||||||
The following details ResponseDX® revenue for the three months ended March 31, 2013 and 2014: | |||||||||||||||
Three Months | |||||||||||||||
Ended March 31, | |||||||||||||||
(Unaudited) | |||||||||||||||
2013 | 2014 | ||||||||||||||
Net Medicare revenue | $ | 1,344,215 | $ | 1,308,422 | |||||||||||
Net Private Payor revenue | 1,838,283 | 2,009,131 | |||||||||||||
Net ResponseDX® revenue | $ | 3,182,498 | $ | 3,317,553 | |||||||||||
Cost-Containment Measures | |||||||||||||||
Both government and private pay sources have instituted cost-containment measures designed to limit payments made to providers of health care services, which include diagnostic test providers such as the Company, and there can be no assurance that future measures designed to limit payments made to providers will not adversely affect the Company. | |||||||||||||||
Regulatory Matters | |||||||||||||||
A portion of the Company’s revenues are derived from Medicare reimbursement. Laws and regulations governing Medicare programs are complex and subject to change and to interpretation, and the Company may be adversely affected by future changes in the applicable laws and regulations and governmental investigations, lawsuits or private actions which include mandatory damages, fines, penalties, criminal charges, loss or suspension of licenses and/or suspension or exclusion from Medicare and certain other governmental programs. The Company believes that it is in compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving allegations of potential wrongdoing. | |||||||||||||||
Medicare reimbursement rates are also subject to regulatory changes and government funding restrictions. In January 2013, a Medicare fee schedule update was announced which included proposed changes to Medicare reimbursement rates that significantly reduced the reimbursement rates for certain of the testing services we provide. The Company participated with other impacted organizations to provide guidance to the local Medicare Administrative Contractor (“MAC”) that resulted in the local MAC updating certain pricing through September 2013 which reflected an increase in many of the tests originally priced in January 2013. On October 1, 2013, the Centers for Medicare and Medicaid Services (“CMS”) issued fees for some, but not all, of the CPT codes used by the Company. It is uncertain if continued guidance provided to Medicare and the local MAC by impacted organizations will result in additional fee increases or additional positive coverage determinations in 2014. If, however, the current reduction in reimbursement rates is adopted as is, it may have a material adverse effect on the Company's operations. | |||||||||||||||
As a result of these Current Procedural Terminology (“CPT”) code changes and Medicare price changes, we have experienced a departure from our normal reimbursement patterns with Medicare and other payors. Specifically, we have experienced delays in certain reimbursements for services and an increase in initial denials of claims for certain services provided. Accordingly, we re-evaluated the assumptions employed in our model for estimating revenue to be recognized for ResponseDX® testing. We view the code and price changes described above as affecting only the assumptions we used in pricing our services. The nature of the testing we provide, the evidence we gather to establish the creditworthiness of our payors and the delivery method of our services have not changed from prior periods, and there are no indicators that these assumptions require change. | |||||||||||||||
We performed an analysis that considered our historical patterns of revenue by payor in conjunction with the fluctuations we experienced in the three months ended March 31, 2013 and 2014 to arrive at the revenue recorded during those periods. We believe that the changes in CPT codes and pricing that are causing confusion and erratic payment experience in the payor community will take some time to resolve. The time needed for resolution will depend upon Medicare and the local MAC releasing additional pricing changes and potentially, revisions to previously revised prices, and upon the private payor community adopting the new CPT codes and some level of revised pricing. Accordingly, our revenue recognition estimates could be materially affected in future periods as pricing and payments patterns change and develop, and we may be materially affected by future or retroactive price changes. | |||||||||||||||
On July 8, 2013, CMS released a new proposed rulemaking entitled “Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule, Clinical Laboratory Fee Schedule & Other Revisions to Part B for CY 2014”. This proposed rule contains a number of provisions that may adversely impact the level of reimbursement for a variety of tests for which the Company receives reimbursement from the Medicare program beginning in 2014. Among other things, CMS has proposed examining approximately 1,200 laboratory tests that appear on the Clinical Lab Fee Schedule (“CLFS”) over a period of five years to determine whether advances in technology may have reduced the cost of providing such tests and whether or not the level of reimbursement should be revised. The Company is currently performing molecular testing which is reimbursed using CPT codes that fall on the CLFS. CMS has also proposed changing the methodology used to determine reimbursement rates for the technical component of certain tests reimbursed off of the Physician Fee Schedule (“PFS”). Among other provisions, CMS has proposed limiting the Relative Value Units (“RVUs”) ascribed to the Practice Expense component of their reimbursement formula for tests performed in “Non-Facilities” (which would include most clinical laboratories like the Company) to the RVUs that have been ascribed for the same procedures under the Hospital Outpatient Prospective Payment System, or the Ambulatory Payment Classification (“APC”) system which are used to reimburse “Facilities” (such as hospitals and ambulatory surgery centers). The Company currently performs FISH testing, which may be impacted by this PFS rule change if it is enacted. CMS has not yet proposed any specific rates for 2014 and the Company is examining the potential impact that a reduction in the level of reimbursement for the tests the Company offers may have on its operations. | |||||||||||||||
Additionally, CMS has as part of its regulatory structure the National Correct Coding Initiative (“NCCI”). Recent changes to NCCI guidance may reduce allowable quantities billed for FISH testing. These changes would lower reimbursement amounts for FISH tests, and there can be no assurance that CMS will make any modifications in the existing language of the NCCI documents. | |||||||||||||||
A number of proposals for legislation or regulation continue to be under discussion which could have the effect of substantially reducing Medicare reimbursements for clinical laboratories or introducing cost sharing to beneficiaries. Depending upon the nature of regulatory action, if any, which is taken and the content of legislation, if any, which is adopted, the Company could experience a significant decrease in revenues from Medicare and Medicaid, which could have a material adverse effect on the Company. The Company is unable to predict, however, the extent to which such actions will be taken. | |||||||||||||||
Cost of Revenue | |||||||||||||||
Cost of revenue represents the cost of materials, direct labor, royalties, costs associated with processing tissue specimens including pathological review, staining, microdissection, paraffin extraction, reverse transcription polymerase chain reaction, fluorescence in situ hybridization (“FISH”), quality control analyses, license fees and delivery charges necessary to render an individualized test result. Costs associated with performing tests are recorded as the tests are processed. | |||||||||||||||
License Fees | |||||||||||||||
The Company licenses technology for the extraction of RNA and DNA from FFPE tumor specimens from the University of Southern California (“USC”) in exchange for royalty fees on revenue generated by use of the technology. These royalties are calculated as a fixed percentage of revenue that we generate from use of the technology licensed from USC. We also maintain a non-exclusive license to use Roche Molecular Systems, Inc.’s (“Roche”) PCR, homogenous PCR, and reverse transcription PCR processes. We pay Roche a fixed percentage royalty fee for revenue that we generate through use of this technology. | |||||||||||||||
The Company is subject to potentially significant variations in royalties recorded in any period. While the amount paid is based on a fixed percentage from revenues of specific tests pursuant to terms set forth in the agreements with USC and Roche, the amount due is calculated based on the revenue we recognize using the respective licensed technology. As discussed above, this revenue can vary from period to period as it is dependent on the timing of the specimens submitted by our clients for testing. | |||||||||||||||
Additionally, the Company periodically analyzes the technical procedures performed in its test offerings to assess which activities utilize licensed technologies and to calculate royalties for use of the licensed technology. The most recent analyses indicate that the Company could owe less than the amounts that have been accrued for royalties payable. However, the licensors have not reviewed the Company’s updated royalty calculations. As a result, the Company has not reduced the historical accrued liability for royalties but has adjusted the current period accrual based on the revised calculation. | |||||||||||||||
Research and Development | |||||||||||||||
The Company expenses costs associated with research and development activities as incurred. Research and development costs are expensed as incurred and classified as research and development costs. Research and development costs include employee costs (salaries, payroll taxes, benefits, and travel), equipment depreciation and warranties and maintenance, laboratory supplies, primers and probes, reagents, patent costs and occupancy costs. | |||||||||||||||
Line of Credit | |||||||||||||||
On July 14, 2011, the Company entered into a line of credit agreement with Silicon Valley Bank (the “Bank”). The agreement has been amended most recently on March 7, 2013. The line of credit is collateralized by the Company’s pharmaceutical, Private Payor and Medicare receivables. The amended maximum amount that can be borrowed from the credit line is $2,000,000. As of March 31, 2014, the amount the Company can draw from the line of credit was $1,000,000 calculated as the lesser of (i) the Company’s calculated borrowing base, which was 80% of certain of the Company’s accounts receivable, or (ii) the amount available under the credit line. As of March 31, 2014, the interest fees associated with this line of credit were set at the prime rate plus 1%. During 2013 and the three months ended March 31, 2014, the rate charged to the Company was 5%. As needed from time to time, the Company may draw on this line for use for general corporate purposes. As of December 31, 2013 and March 31, 2014, the Company had drawn $1,000,000 against the line of credit. The line of credit is subject to various financial covenants. At March 31, 2014, the Company was in compliance with the covenants. As of December 31, 2013, the Company was not in compliance with one of these covenants, and the Bank waived the covenant violation. Prior to the most recent amendment on March 7, 2013, the Company was also not in compliance with certain other covenants. The September 28, 2012 amendment provided forbearance for the failure to comply with these certain covenants through November 30, 2012, and modified the covenants to include a requirement that the Company maintain account balances at the Bank totaling a minimum of $4,000,000 during the covered forbearance period. The December 6, 2012 amendment to the agreement extended the forbearance for the failure to comply with these certain covenants and the requirement for the Company to maintain account balances at the Bank totaling a minimum of $4,000,000 during the forbearance period. In addition, pursuant to the March 7, 2013 amendment, the Bank waived the Company's existing breach of financial covenants under the credit agreement and the parties restructured the line of credit to provide that, among other things: (i) the revolving line of credit's maturity date was extended to March 7, 2015, (ii) the fee for the unused portion of the revolving line of credit was reduced from 0.375% to 0.250% per annum of the average unused portion of the revolving line of credit, (iii) the Company must continue to meet certain reporting requirements including providing financial statements and a certificate of compliance with the terms and conditions of the credit agreement by an authorized officer to the Bank within 45 days of the last day of each calendar quarter, provided that if the Company has less than $4,000,000 in its account at the Bank at any time during such calendar quarter, the Company must provide the financial statements and the certificate of compliance within 30 days of the end of such calendar quarter and provide a monthly report on revenues realized from Private Payors, (iv) the financial covenants were amended and restated to require the Company to maintain a ratio of quick assets to current liabilities of 1:50 to 1:00 and meet certain specified minimum adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) requirements as defined in the amendment and measured on a monthly basis and (v) the Bank is granted certain additional inspection of books, records and collateral rights. | |||||||||||||||
As of December 31, 2013, the line of credit under the credit agreement was classified as a non-current liability on the accompanying consolidated balance sheets as the line of credit had a maturity date of greater than one year from the date of the balance sheet. As of March 31, 2014, the line of credit under the credit agreement was classified as a current liability on the accompanying consolidated balance sheets as the line of credit had a maturity date of less than one year from the date of the balance sheet. | |||||||||||||||
From time to time, the Company’s calculated borrowing base under its Bank line of credit may decrease to a level where the Company is in an over-advance position in which case the Company will be required to repay any outstanding amounts greater than the calculated borrowing base for such covered period back to the Bank immediately. The Company will be able to draw down on the credit line again with respect to such paid back amount once the Company is in compliance with the borrowing base requirement. | |||||||||||||||
Income Taxes | |||||||||||||||
Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. | |||||||||||||||
ASC 740, Income Taxes, clarifies the accounting for uncertainty in income taxes recognized in financial statements and requires the impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority. As of December 31, 2013 and March 31, 2014, the Company does not have a liability for unrecognized tax benefits. The Company recognizes interest and penalties associated with tax matters as part of the income tax provision and includes accrued interest and penalties with the related tax liability in the balance sheet. For the periods ended March 31, 2013 and 2014, interest and penalties totaling $107 and $0, respectively, were recorded in the consolidated statements of operations. | |||||||||||||||
Stock-Based Compensation | |||||||||||||||
The Company accounts for stock-based compensation in accordance with ASC 718, Stock Compensation, Share-Based Payment. Stock-based compensation expense for all stock-based compensation awards granted is based on the grant-date fair value estimated in accordance with the provisions of ASC 718. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the option vesting period. | |||||||||||||||
The Company accounts for equity instruments issued to non-employees in accordance with ASC 505, Equity. Under ASC 505, stock option awards issued to non-employees are measured at fair value using the Black-Scholes option-pricing model and recognized pursuant to a performance model. | |||||||||||||||
Management Estimates | |||||||||||||||
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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. Significant estimates in these condensed consolidated financial statements have been made for revenue, allowances for doubtful accounts, impairment of long-lived assets, depreciation of property and equipment and stock-based compensation. Actual results could differ materially from those estimates. | |||||||||||||||
Long-lived Assets | |||||||||||||||
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates potential impairment by comparing the carrying amount of the asset with the estimated undiscounted future cash flows associated with the use of the asset and its eventual disposition. Should the review indicate that the assets cost is not recoverable, the carrying value of the asset would be reduced to its fair value, which is measured by future discounted cash flows. | |||||||||||||||
Foreign Currency Translation | |||||||||||||||
The financial position and results of operations of the Company’s foreign subsidiary are determined using local currency as the functional currency. Assets and liabilities of these operations are translated at the exchange rate in effect at each period-end. Statement of Operations amounts are translated at the average rate of exchange prevailing during the period. Translation adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive loss in stockholders’ equity. | |||||||||||||||
Comprehensive Loss | |||||||||||||||
The components of comprehensive loss are accumulated net loss and unrealized foreign currency translation adjustments for the three months ended March 31, 2013 and 2014. | |||||||||||||||
Fair Value of Financial Instruments | |||||||||||||||
Cash and cash equivalents are stated at cost, which approximates fair market value. Cash equivalents consist of money market accounts, with fair values estimated based on quoted market prices. Debt balances are stated at historical amounts less principal payments, which approximate fair market value. The Company believes interest rates in its debt agreements are commensurate with lender risk profiles for similar companies. | |||||||||||||||
Advertising Costs | |||||||||||||||
The Company markets its services through its advertising activities in trade publications and on the internet. Advertising costs are included in selling and marketing expenses on the statements of operations and are expensed as incurred. Advertising costs for the three months ended March 31, 2013 and 2014 were $0 and $6,422, respectively. | |||||||||||||||
Concentration of Credit Risk and Clients and Limited Suppliers | |||||||||||||||
Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. At March 31, 2014, the Company had $4,498,950 in cash and cash equivalents that exceeded federally insured limits. At March 31, 2014, $12,333 of cash was held outside of the United States. | |||||||||||||||
Revenue sources that account for greater than 10 percent of total revenue are provided below. | |||||||||||||||
Three Months Ended March 31, | |||||||||||||||
2013 | 2014 | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
Revenue | Percent of | Revenue | Percent of | ||||||||||||
Total | Total | ||||||||||||||
Revenue | Revenue | ||||||||||||||
Abbott Molecular, Inc. | $ | 910,182 | 16 | % | $ | 21,824 | * | % | |||||||
GlaxoSmithKline entities: | |||||||||||||||
GlaxoSmithKline LLC | $ | — | — | % | $ | — | — | % | |||||||
GlaxoSmithKline Biologicals S.A. | $ | 1,356,384 | 24 | % | $ | 328,281 | * | % | |||||||
Total GlaxoSmithKline entities | $ | 1,356,384 | 24 | % | $ | 328,281 | * | % | |||||||
Medicare, net of contractual allowances | $ | 1,344,215 | 24 | % | $ | 1,308,422 | 34 | % | |||||||
* Represents less than 10% of revenue. | |||||||||||||||
Customers that account for greater than 10 percent of gross accounts receivable are provided below. | |||||||||||||||
As of December 31, 2013 | As of March 31, 2014 | ||||||||||||||
(Unaudited) | |||||||||||||||
Receivable | Percent of | Receivable | Percent of | ||||||||||||
Balance | Total | Balance | Total | ||||||||||||
Receivables | Receivables | ||||||||||||||
GlaxoSmithKline entities: | |||||||||||||||
GlaxoSmithKline LLC | $ | 597,937 | * | % | $ | — | — | % | |||||||
GlaxoSmithKline Biologicals S.A. | $ | 544,298 | * | % | $ | 631,033 | * | % | |||||||
Total GlaxoSmithKline entities | $ | 1,691,144 | 13 | % | $ | 631,033 | * | % | |||||||
Medicare, net of contractual allowances | $ | 2,422,611 | 28 | % | $ | 2,223,793 | 31 | % | |||||||
* Represents less than 10% of accounts receivable. | |||||||||||||||
Many of the supplies and reagents used in the Company’s testing process are procured from a limited number of suppliers. Any supply interruption or an increase in demand beyond the suppliers’ capabilities could have an adverse impact on the Company’s business. Management believes it can identify alternative sources, if necessary, but it is possible such sources may not be identified in sufficient time to avoid an adverse impact on its business. The Company purchases certain laboratory supplies and reagents primarily from two suppliers. Purchases from these two suppliers accounted for approximately 65% and 74% of the Company’s reagent purchases for the three months ended March 31, 2013 and 2014, respectively. | |||||||||||||||
Property_and_Equipment_and_Int
Property and Equipment and Intangible Assets | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Property, Plant and Equipment [Abstract] | ' | |||||||
Property and Equipment and Intangible Assets | ' | |||||||
3. Property and Equipment and Intangible Assets | ||||||||
Property and equipment and intangible assets consist of the following: | ||||||||
December 31, | March 31, | |||||||
2013 | 2014 | |||||||
(Unaudited) | ||||||||
Laboratory equipment | $ | 4,468,055 | $ | 4,475,415 | ||||
Furniture and equipment | 736,886 | 750,886 | ||||||
Leasehold improvements | 487,843 | 496,523 | ||||||
5,692,784 | 5,722,824 | |||||||
Less: Accumulated depreciation | -3,758,202 | -3,956,167 | ||||||
Total property and equipment, net | $ | 1,934,582 | $ | 1,766,657 | ||||
Purchased software | $ | 749,587 | $ | 764,105 | ||||
Internally developed software | 213,361 | 213,361 | ||||||
Trademarks | 33,000 | 33,000 | ||||||
995,948 | 1,010,466 | |||||||
Less: Accumulated amortization | -228,725 | -237,642 | ||||||
Total intangible assets, net | $ | 767,223 | $ | 772,824 | ||||
Depreciation and amortization expense, included in cost of revenue, selling and marketing expenses, general and administrative expenses, and research and development expenses for the three months ended March 31, 2013 and 2014 was $137,401 and $206,884, respectively. | ||||||||
Capital Leases | ||||||||
The Company leases certain equipment that is recorded as capital leases. This equipment is included in property and equipment on the accompanying consolidated balance sheet as of March 31, 2014 as follows: | ||||||||
(Unaudited) | ||||||||
Equipment purchased under capital leases | $ | 584,150 | ||||||
Less: Accumulated amortization | -369,449 | |||||||
Equipment purchased under capital leases, net | $ | 214,701 | ||||||
Future minimum lease payments under capital leases as of March 31, 2014 are as follows: | ||||||||
Years ending December 31, | (Unaudited) | |||||||
2014 | $ | 130,431 | ||||||
2015 | 101,309 | |||||||
2016 | 46,852 | |||||||
Total minimum lease payments | 278,592 | |||||||
Less amount represented by interest | -32,979 | |||||||
Less current portion | -129,456 | |||||||
Capital lease obligation, net of current portion | $ | 116,157 | ||||||
Loss_Per_Share
Loss Per Share | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Earnings Per Share [Abstract] | ' | |||||||
Loss Per Share | ' | |||||||
4. Loss Per Share | ||||||||
The Company calculates net loss per share in accordance with ASC 260, Earnings Per Share. Under the provisions of ASC 260, basic net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock and dilutive common stock equivalents then outstanding. Common stock equivalents consist of shares of common stock issuable upon the exercise of stock options and warrants. | ||||||||
The following table sets forth the computation for basic and diluted loss per share: | ||||||||
Three Months Ended March 31, | ||||||||
2013 | 2014 | |||||||
(Unaudited) | (Unaudited) | |||||||
Numerator: | ||||||||
Net loss | $ | -824,304 | $ | -3,504,439 | ||||
Numerator for basic and diluted earnings per share | $ | -824,304 | $ | -3,504,439 | ||||
Denominator: | ||||||||
Denominator for basic and diluted earnings per share — weighted-average shares outstanding | 32,797,625 | 38,718,336 | ||||||
Basic and diluted loss per share | $ | -0.03 | $ | -0.09 | ||||
Outstanding stock options to purchase 1,711,643 and 2,217,134 shares for the periods ended March 31, 2013 and 2014, respectively, were excluded from the calculation of diluted loss per share as their effect would have been antidilutive. | ||||||||
Commitments_and_Contingencies
Commitments and Contingencies | 3 Months Ended | ||||
Mar. 31, 2014 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
Commitments and Contingencies | ' | ||||
5. Commitments and Contingencies | |||||
Operating Leases | |||||
The Company leases 27,446 square feet of office and laboratory space in Los Angeles, California, under a non-cancelable operating lease that was amended and extended on February 3, 2014 and will expire on June 30, 2015. The Company has the option to extend the lease to June 30, 2016. The Company also leased 1,460 square feet of space in Frederick, Maryland, where administrative functions were performed until July 31, 2012. The Company moved the administrative functions performed out of this office primarily to its Los Angeles facilities and closed the Maryland office on July 31, 2012. The lease for the Maryland office expired on January 31, 2013. | |||||
Rent expense, which is classified in cost of revenue, selling and marketing, general and administrative, and research and development expenses was $160,790 and $212,181 for the three months ended March 31, 2013 and 2014, respectively. | |||||
Future minimum lease payments by year and in the aggregate, under the Company’s non-cancelable operating leases for facilities, equipment and software as a service, consist of the following at March 31, 2014: | |||||
Years Ending December 31, | Unaudited | ||||
2014 | $ | 710,160 | |||
2015 | 522,518 | ||||
2016 | 35,807 | ||||
Total | $ | 1,268,485 | |||
Guarantees | |||||
The Company enters into indemnification provisions under its agreements with other counterparties in its ordinary course of business, typically with business partners, clients and landlords. Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Company's activities. These indemnification provisions generally survive termination of the underlying agreement. The Company reviews its exposure under these agreements no less than annually, or more frequently when events require. The Company believes the estimated fair value of these agreements is minimal as, historically, no payments have been made by the Company under these indemnification obligations. Accordingly, the Company has no liabilities recorded for these agreements as of December 31, 2013 and March 31, 2014. | |||||
Legal Matters | |||||
The Company is, from time to time, involved in legal proceedings, regulatory actions, claims and litigation arising in the ordinary course of business. These matters are not expected to have a material adverse effect upon the Company’s financial condition. | |||||
Employment Agreements | |||||
The Company has employment contracts with several individuals, which provide for annual base salaries and potential bonuses. These contracts contain certain change of control, termination and severance clauses that require the Company to make payments to certain of these employees if certain events occur as defined in their respective contracts. | |||||
License_and_Collaborative_Agre
License and Collaborative Agreements | 3 Months Ended |
Mar. 31, 2014 | |
License And Collaborative Agreements [Abstract] | ' |
License and Collaborative Agreements | ' |
6. License and Collaborative Agreements | |
License Agreement with the University of Southern California (“USC”) | |
In April 2000, as amended in June 2002 and April 2005, the Company entered into a license agreement with USC. Under this agreement, USC granted the Company a worldwide, exclusive license with the right to sublicense, the patents for nucleic acid extraction methodologies (“RGI-1”) and related technology, for use in human and veterinary diagnostic laboratory services, the sale of clinical diagnostic products, and the sale of research products to the research community. USC retains the right under the agreement to use the technology for research and educational purposes. | |
In consideration for this license, the Company agreed to pay USC royalties based on a percentage of net sales of products or services that make use of RGI-1 and related technology and to meet a certain minimum in royalty payments. Royalty expense relating to this agreement amounted to $104,105 and $10,961 for the three months ended March 31, 2013 and 2014, respectively. Such expense is included in cost of revenue in the accompanying unaudited consolidated statements of operations. | |
License Agreement with Roche Molecular Systems (“Roche”) | |
In November 2004, the Company entered into a non-exclusive license to use Roche’s technology including specified nucleic acid amplification processes (“PCR Processes”) to perform certain human invitro clinical laboratory services. In consideration for this license, the Company is obligated to pay royalties to Roche, based on a percentage of net sales of products or services that make use of the PCR Processes. Royalty expense included in cost of revenue relating to this agreement amounted to $90,145 and $44,373 for the three months ended March 31, 2013 and 2014, respectively. | |
In November 2004, the Company also entered into an agreement with Roche, pursuant to which the Company is collaborating with Roche to produce commercially viable assays used in the validation of genetic markers for pharmaceutical companies. Specifically, the Company has licensed the rights to Roche to use the pre-diagnostic assays the Company develops in the course of using its RNA-extraction technologies to provide testing services to pharmaceutical companies and to produce diagnostic kits that then can be sold commercially to those pharmaceutical companies. Roche is required to pay the Company royalties of a certain percentage of net sales of such diagnostic kits sold to pharmaceutical companies. Through March 31, 2014, Roche has not been required to pay any royalties to the Company pursuant to this agreement. | |
Services Agreement with Taiho Pharmaceutical Co., Ltd. (“Taiho”) | |
In July 2001, the Company entered into an agreement with Taiho pursuant to which the Company provided Taiho with RGI-1 generated molecular-based tumor analyses for use in guiding chemotherapy treatment for cancer patients and for use in Taiho’s business of developing and marketing pharmaceutical and diagnostic products for use against cancer. The agreement was subsequently amended and extended through December 31, 2013. Revenue recognized under this agreement for the three months ended March 31, 2013 and 2014 was $33,920 and $0, respectively. | |
Services Agreement with GlaxoSmithKline, LLC formerly known as SmithKline Beecham Corporation (d.b.a. GlaxoSmithKline or “GSK”) | |
In January 2006, the Company entered into a master services agreement with GSK, a leading pharmaceutical manufacturer, pursuant to which the Company provides services in connection with profiling the expression of various genes from a range of human cancers. Under the agreement, the Company provides GSK with testing services as described in individual protocols and GSK pays the Company for such services based on the pricing schedule established for each particular protocol. GSK was obligated to make minimum annual payments to the Company under the agreement and also was obligated to make a non-refundable upfront payment to the Company, to be credited against work undertaken pursuant to the agreement. | |
In December 2008, the Company amended and restated its master services agreement with GSK and extended the term of the agreement for a two-year period, with the option for the parties to extend the agreement for additional one-year periods at the end of the term, upon their mutual written agreement. In addition, the Company became a preferred provider to GSK and its affiliates of genetic testing services on a fee-for-service basis and, in anticipation of the services to be provided, GSK agreed to make a non-refundable upfront payment. | |
The Company did not recognize any revenue relating to the GSK agreement for the three months ended March 31, 2013 and 2014, respectively. | |
Non-Exclusive License Agreement with GSK | |
In March 2010, the Company entered into a non-exclusive license agreement with GSK. Under the agreement, the Company granted GSK a non-exclusive, sublicenseable license to its proprietary PCR analysis technology and diagnostic expertise to assess BRAF gene mutations in human tumor samples. As part of the agreement, the Company received a non-refundable technology access fee in consideration for the transfer of the Company’s technology to GSK. The agreement also contains milestone provisions which allowed the Company to earn further payments from GSK, and, as of March 31, 2014, the Company has met all the milestones in the agreement and earned the applicable milestone payments. | |
Master Services Agreement with GlaxoSmithKline Biologicals S.A. (“GSK Bio”) | |
On July 26, 2012, the Company entered into a second amended and restated master services agreement with GSK Bio, the vaccine division of GSK. Pursuant to this agreement, which has an effective date of May 15, 2012, the Company provides testing services for clinical trials and epidemiology studies relating to GSK Bio’s cancer immunotherapies. The Company performs these testing services on a fee-for-service basis as embodied in written task orders. GSK Bio retains the intellectual property rights to inventions, improvements and data resulting from the services performed under the agreement. The Company retains all intellectual property rights to its testing services, proprietary processes and all accompanying patent information owned by the Company. All intellectual property owned by either party on the date of the agreement remains the exclusive property of the owning party. | |
The agreement will expire on December 31, 2014, provided that any outstanding task orders at the time of termination will not thereby terminate (unless otherwise agreed in writing by the parties), and any such task orders will continue for the respective terms specified in such task orders (and the parties shall continue to perform their obligations thereunder). GSK Bio may terminate the agreement, without cause, upon 90 days’ written notice to the Company. The Company may terminate the agreement, without cause, upon one year’s written notice to GSK Bio. The agreement may also be terminated early if either party enters bankruptcy or similar proceedings or in the event of a material breach. GSK Bio may terminate the agreement immediately if the Company experiences a “change of control,” as defined in the agreement. | |
The agreement also provides for mutual indemnification by the parties and contains customary representations, warranties and covenants, including covenants governing the parties’ use of confidential information and representations regarding adequate insurance coverage or self-insurance. | |
The Company recognized revenue of $1,356,384 and $328,281 relating to the services performed for GSK Bio for the three months ended March 31, 2013 and 2014, respectively. | |
Stock_Option_Plans
Stock Option Plans | 3 Months Ended | ||||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||||||||||
Stock Option Plans | ' | ||||||||||||||||||
7. Stock Option Plans | |||||||||||||||||||
In March 2000, the Company adopted a Stock Option Plan (the “2000 Stock Plan”) as approved by its Board of Directors. Under the 2000 Stock Plan, the Company granted options to acquire up to 1,600,000 shares of common stock. In connection with the adoption of the 2006 Employee, Director and Consultant Stock Plan, as further discussed below, the Company is to grant no additional options under the 2000 Stock Plan. Under the 2000 Stock Plan, there were no options to purchase shares of the Company’s common stock that remained outstanding as of December 31, 2013. Prior to March 2007, the Company also granted options to purchase 16,000 shares of common stock to two consultants which were granted under separate agreements outside of the 2000 Stock Plan. | |||||||||||||||||||
On October 26, 2006, the Board of Directors of the Company approved, and on May 1, 2007, reapproved the adoption of the 2006 Employee, Director and Consultant Stock Plan (the “2006 Stock Plan”). The stockholders approved the 2006 Stock Plan on June 1, 2007. The initial number of shares which may be issued from time to time pursuant to the 2006 Stock Plan was 2,160,000 shares of common stock. Also, the 2006 Stock Plan includes the number of shares subject to purchase under options issued under the 2000 Stock Plan, where the options expired on or after October 18, 2006, subject to a maximum of 210,000 additional options. In addition, on the first day of each fiscal year of the Company during the period beginning in fiscal year 2008 and ending on the second day of fiscal year 2017, the number of shares that may be issued from time to time pursuant to the 2006 Stock Plan is increased by the lesser of (i) 200,000 shares or equivalent, after determination of the effect of any stock split, stock dividend, combination or similar transactions as set forth in the 2006 Stock Plan, (ii) 5% of the number of outstanding shares of common stock of the Company on such date or (iii) an amount determined by the Board of Directors of the Company. The initial number of shares available for issuance of 2,160,000 increased by 210,000 for options issued under the 2000 Stock Plan expiring after October 2006 and by 200,000 in 2008 through 2012, resulting in the total number of shares that may be issued as of January 1, 2014 to be 3,770,000. As of March 31, 2014, there were 1,552,866 options available for grant under the 2006 Stock Plan. | |||||||||||||||||||
Employee options vest according to the terms of the specific grant and expire 10 years from the date of grant. Non-employee option grants to date typically vest over a 2 to 3 year period. The Company had 2,217,134 options outstanding at a weighted average exercise price of $1.85 at March 31, 2014. There were 1,212,311 non-vested stock options outstanding with a weighted average grant date fair value of $1.34 at March 31, 2014. As of March 31, 2014, there was $969,580 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2006 Stock Plan. That cost is expected to be recognized over a weighted-average period of 2.7 years. | |||||||||||||||||||
Except for certain grants of restricted common stock and common stock options containing market conditions as described below, the Company estimated share-based compensation expense for the three months ended March 31, 2013 using the Black-Scholes model with the following weighted average assumptions: | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
31-Mar-13 | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
Risk free interest rate | 1.03-1.14 | % | |||||||||||||||||
Expected dividend yield | — | ||||||||||||||||||
Expected volatility | 104.0-104.9 | % | |||||||||||||||||
Expected term **(in years) | 6.25 | ||||||||||||||||||
Forfeiture rate | 7 | % | |||||||||||||||||
No options were granted during the three months ended March 31, 2014. | |||||||||||||||||||
** Expected term is calculated using SAB 107, Simplified Formula. Management has concluded that the use of the simplified method for calculating the expected term of its common stock option grants is appropriate given the Company’s lack of history of option exercises. | |||||||||||||||||||
The following table summarizes the stock option activity for the 2006 Plan for the three months ended March 31, 2014: | |||||||||||||||||||
Weighted | |||||||||||||||||||
Average | Remaining | Aggregate | |||||||||||||||||
Number of | Exercise | Contractual | Intrinsic | ||||||||||||||||
Shares | Price | Life (Years) | Value | ||||||||||||||||
Outstanding, December 31, 2013 | 2,288,076 | $ | 1.83 | 8.41 | $ | 1,082 | |||||||||||||
Granted (Unaudited) | — | $ | — | — | — | ||||||||||||||
Exercised (Unaudited) | -15,300 | $ | 1.16 | 8.33 | 6,007 | ||||||||||||||
Expired (Unaudited) | — | — | — | — | |||||||||||||||
Forfeited (Unaudited) | -55,642 | $ | 1.36 | — | 110 | ||||||||||||||
Outstanding, March 31, 2014 (Unaudited) | 2,217,134 | $ | 1.85 | 8.14 | $ | 14,054 | |||||||||||||
Exercisable, March 31, 2014 (Unaudited) | 1,004,823 | $ | 2.46 | 8.05 | $ | 8,042 | |||||||||||||
The weighted-average grant-date fair value of options granted during the three months ended March 31, 2013 was $1.39. The Company did not grant any options during the three months ended March 31, 2014. | |||||||||||||||||||
The following table provides additional information regarding options outstanding under the 2006 Plan as of March 31, 2014 (unaudited): | |||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||
Exercise Price | Number of | WA | Number of | WA | |||||||||||||||
Options | Remaining | Options | Remaining | ||||||||||||||||
Contractual | Contractual | ||||||||||||||||||
Term | Term | ||||||||||||||||||
$ | 1.00 to 1.99 | 1,712,134 | 8.86 | 558,810 | 7.92 | ||||||||||||||
2.00 to 2.99 | 287,500 | 7.32 | 228,513 | 7.19 | |||||||||||||||
3.00 to 3.99 | 71,000 | 4.33 | 71,000 | 4.33 | |||||||||||||||
4.29 | 11,500 | 3.4 | 11,500 | 3.4 | |||||||||||||||
7 | 135,000 | 3.19 | 135,000 | 3.19 | |||||||||||||||
2,217,134 | 8.14 | 1,004,823 | 6.81 | ||||||||||||||||
Stock-based compensation expense was classified as follows in the results of operation: | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
March 31, | |||||||||||||||||||
( Unaudited ) | |||||||||||||||||||
2013 | 2014 | ||||||||||||||||||
Cost of revenue | $ | 13,487 | $ | 11,256 | |||||||||||||||
Research and development | 9,842 | 13,197 | |||||||||||||||||
Sales and marketing | 17,400 | 15,749 | |||||||||||||||||
General and administrative | 64,595 | 144,567 | |||||||||||||||||
Totals | $ | 105,324 | $ | 184,769 | |||||||||||||||
Thomas Bologna was appointed Chief Executive Officer of the Company on December 21, 2011 and in connection with his appointment, Mr. Bologna was awarded stock options outside of the 2006 Stock Plan. Pursuant to the employment agreement between the Company and Mr. Bologna, dated December 21, 2011, and in reliance on NASDAQ Listing Rule 5636(c), the Company granted Mr. Bologna (i) a stock option to purchase 600,000 shares of the Company’s common stock, which vests monthly over 36 months from the date of grant, subject to his continued employment with the Company, (ii) a stock option to purchase 300,000 shares of the Company’s common stock, which vested in 2012, and (iii) 270,000 shares of restricted common stock of the Company, which vest on the date on which the 30-day trailing average closing price of the Company’s common stock equals or exceeds $2.40. The exercise price of the stock options is $1.20 per share, the closing price of the Company’s common stock on the day prior to the date of grant. The expense recognized in connection with these grants was $44,531 and $44,531 for the three months ended March 31, 2013 and 2014, respectively, and is included in the above table. | |||||||||||||||||||
The following table summarizes these awards to Mr. Bologna: | |||||||||||||||||||
Intrinsic | |||||||||||||||||||
Value as of | Options | Remaining | |||||||||||||||||
March 31, | Options | Contractual | |||||||||||||||||
Type | Grant Date | Number of Awards | 2014 | Exercise Price | Exercisable | Term | |||||||||||||
Restricted Shares of Common Stock | 12/21/11 | 270,000 | $ | 321,300 | $ | — | — | 7.7 | |||||||||||
Options | 12/21/11 | 600,000 | $ | — | $ | 1.2 | 400,000 | 7.7 | |||||||||||
Options | 12/21/11 | 300,000 | $ | — | $ | 1.2 | 300,000 | 7.7 | |||||||||||
Income_Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2014 | |
Income Tax Disclosure [Abstract] | ' |
Income Taxes | ' |
8. Income Taxes | |
Deferred income taxes result from temporary differences between income tax and financial reporting computed at the effective income tax rate. The Company has established a valuation allowance against its net deferred tax asset due to the uncertainty surrounding the realization of such asset. Management periodically evaluates the recoverability of the deferred tax assets. At such time it is determined that it is more likely than not that deferred tax assets are realizable, the valuation allowance will be reduced. | |
The Company files U.S. federal, U.S. state, and foreign tax returns. The Company’s major tax jurisdictions are U.S. federal and the State of California. The Company is subject to tax examinations for the open years from 2003 through 2013. | |
Segment_Information
Segment Information | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Segment Reporting [Abstract] | ' | |||||||
Segment Information | ' | |||||||
9. Segment Information | ||||||||
The Company operates in a single reporting segment, with an operating facility in the United States. | ||||||||
The following enterprise wide disclosure was prepared on a basis consistent with the preparation of the condensed consolidated financial statements. | ||||||||
The following tables contain certain financial information by geographic area: | ||||||||
Three Months Ended March 31, | ||||||||
2013 | 2014 | |||||||
(Unaudited) | (Unaudited) | |||||||
Net revenue: | ||||||||
United States | $ | 4,153,172 | $ | 3,546,903 | ||||
Europe | 1,361,249 | 342,601 | ||||||
Japan | 109,770 | 5,430 | ||||||
$ | 5,624,191 | $ | 3,894,934 | |||||
December 31, | March 31, | |||||||
2013 | 2014 | |||||||
(Unaudited) | ||||||||
Long-lived assets: | ||||||||
United States | $ | 2,701,805 | $ | 2,539,481 | ||||
Sale_of_Common_Stock
Sale of Common Stock | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Stockholders Equity Note [Abstract] | ' | |||||||
Sale of Common Stock | ' | |||||||
10. Sale of Common Stock | ||||||||
Common stock classified outside of stockholders’ equity | ||||||||
September 2012 Private Placement | ||||||||
On September 13, 2012, the Company entered into a purchase agreement (the “Purchase Agreement”) with Glaxo Group Limited, an affiliate of GSK (the “GSK Investor”) and two existing investors, Swiftcurrent Partners, L.P. and Swiftcurrent Offshore, Ltd. (collectively with the GSK Investor, the “September Investors”) for the private placement of an aggregate of 8,000,000 newly-issued shares of the Company’s common stock (the “September Shares”) at a purchase price of $1.10 per share (the “September 2012 Private Placement”). The Company raised gross cash proceeds of $8,800,000 in the September 2012 Private Placement, which closed on September 13, 2012 (the “Closing”). | ||||||||
Pursuant to the Purchase Agreement, for so long as the GSK Investor or its affiliates own at least 50% of the September Shares it purchased pursuant to the Purchase Agreement, the GSK Investor has the right to designate one non-voting board observer (the "Board Observer"). The Board Observer, if appointed, has the right to attend all meetings of the Board of Directors of the Company and to receive all board meeting materials, subject to certain restrictions set forth in the Purchase Agreement. As of the date hereof, the GSK Investor has not exercised its right to designate the Board Observer. | ||||||||
In connection with the September 2012 Private Placement, the Company also entered into a registration rights agreement, dated September 13, 2012 (the “September Registration Rights Agreement”), with the September Investors pursuant to which the Company agreed to file, within 45 days of the Closing, a registration statement with the SEC to register the September Shares for resale, which registration statement was required to become effective within 180 days following the Closing. The Company also granted the September Investors certain “piggyback” registration rights, which are triggered if the Company proposes to file a registration statement for its own account or the account of one or more stockholders until the earlier of the sale of all of the September Shares or the September Shares becoming eligible for sale under Rule 144(b)(1) without restriction. | ||||||||
Under the September Registration Rights Agreement, the Company is obligated to use commercially reasonable efforts to cause a registration statement to become effective and to remain continuously effective and to maintain the listing of the covered common stock on NASDAQ or other exchanges, as defined, for a period that will terminate upon the earlier of (i) the date on which all Registrable Securities covered by such Registration Statement as amended from time to time, have been sold, (ii) the date on which there are no longer any Registrable Securities outstanding or (iii) three years from the date of filing of such Registration Statement (the “Effectiveness Period”) and advise each September Investor in writing when the Effectiveness Period has expired. “Registrable Securities” means (i) the September Shares and (ii) shares of capital stock or any other securities issued or issuable with respect to or in exchange for the September Shares; provided, that, a security shall cease to be a Registrable Security with respect to a September Investor upon (A) sale by such September Investor pursuant to a registration statement or Rule 144 under the Securities Act of 1933, or (B) such security becoming eligible for sale by such September Investor without restriction pursuant to Rule 144(b)(1). In the event the Company fails to satisfy its obligations under the September Registration Rights Agreement, the Company would be in breach of such agreement, in which event, the September Investors would be entitled to pursue all rights and remedies at law or equity including an injunction or other equitable relief. The September Registration Rights Agreement does not provide an explicitly stated or defined penalty due upon a breach. Because the potential penalty for any breach of the September Registration Rights Agreement is not explicitly stated or defined, which prohibits the Company from applying the guidance of ASC 825-20-15, Registration Payment Arrangements, the Company was required to present the investment of approximately $8,800,000 in the Company’s common stock as common stock outside of stockholders’ equity in the accompanying consolidated balance sheets under ASC 480-10-S99-3, Classification and Measurement of Redeemable Securities. | ||||||||
Pursuant to the September Registration Rights Agreement, the Company filed a registration statement with the SEC on October 26, 2012, to register the September Shares for resale. This registration statement became effective on November 13, 2012 and remained effective as of March 31, 2014. | ||||||||
As of December 31, 2012, the Company has removed the restriction on 3,000,000 of the 8,000,000 September Shares and reclassified the shares to common stock from common stock classified outside of stockholders’ equity. Therefore, as of December 31, 2013 and March 31, 2014, a total of $5,500,000 of common stock relating to the 5,000,000 remaining restricted September Shares was classified outside of stockholders’ equity related to this transaction. | ||||||||
Activity in common stock classified outside of stockholders’ equity was as follows: | ||||||||
Number of | Amount | |||||||
Shares | ||||||||
Balance, December 31, 2013 | 5,000,000 | $ | 5,500,000 | |||||
Issuance of common stock classified outside of stockholders’ equity | — | — | ||||||
Reclassification to stockholders’ equity | — | — | ||||||
Balance, March 31, 2014 (unaudited) | 5,000,000 | $ | 5,500,000 | |||||
Fair_Value_Measurements
Fair Value Measurements | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Fair Value Disclosures [Abstract] | ' | |||||||||||||
Fair Value Measurements | ' | |||||||||||||
11. Fair Value Measurements | ||||||||||||||
ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820 provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. ASC 820 establishes a three-level valuation hierarchy of valuation techniques that is based on observable and unobservable inputs. Classification within the hierarchy is determined based on the lowest level of input that is significant to the fair value measurement. The first two inputs are considered observable and the last unobservable, that may be used to measure fair value and include the following: | ||||||||||||||
Level 1 - Quoted prices in active markets for identical assets or liabilities. | ||||||||||||||
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, 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 for substantially the full term of the assets or liabilities. | ||||||||||||||
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. | ||||||||||||||
As of December 31, 2012, the Company held certain assets that are required to be measured at fair value on a recurring basis, including its cash and cash equivalents. The fair value of these assets was determined using the following inputs in accordance with ASC 820 at December 31, 2012 and March 31, 2013: | ||||||||||||||
Fair Value Measurement as of March 31, 2013 | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
Description | $ | $ | $ | $ | ||||||||||
Money market accounts (1) | 10,000 | 10,000 | — | — | ||||||||||
Fair Value Measurement as of March 31, 2014 | ||||||||||||||
(Unaudited) | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
Description | $ | $ | $ | $ | ||||||||||
Money market accounts (1) | — | — | — | — | ||||||||||
-1 | Included in cash and cash equivalents on the accompanying consolidated balance sheets. | |||||||||||||
As of December 31, 2013 and March 31, 2014, the Company did not hold any liabilities that are required to be measured at fair value on a recurring basis. | ||||||||||||||
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 3 Months Ended | ||||||||||||||
Mar. 31, 2014 | |||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||
Basis of Consolidation | ' | ||||||||||||||
Basis of Consolidation | |||||||||||||||
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Response Genetics, Ltd., a Scottish corporation (the “Subsidiary”), which was incorporated in November 2006. The Subsidiary had no employees or active operations in 2013 or to date in 2014. All significant intercompany transactions and balances have been eliminated in consolidation. | |||||||||||||||
Cash and Cash Equivalents | ' | ||||||||||||||
Cash and Cash Equivalents | |||||||||||||||
The Company considers all highly liquid investments with a maturity date of three months or less from the date of purchase to be cash equivalents. The carrying value of cash equivalents approximates fair value due to the short-term nature and liquidity of these instruments. The Company’s cash equivalents are comprised of cash on hand, deposits in banks and money market investments. | |||||||||||||||
Accounts Receivable | ' | ||||||||||||||
Accounts Receivable | |||||||||||||||
Pharmaceutical Accounts Receivable | |||||||||||||||
The Company invoices its clients as specimens are processed and any other contractual obligations are met. The Company’s contracts with clients typically require payment within 45 days of the date of invoice. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its clients to make required payments. The Company specifically analyzes accounts receivable and historical bad debts, client credit, current economic trends and changes in client payment trends when evaluating the adequacy of the allowance for doubtful accounts. Account balances are charged-off against the allowance when it is probable the receivable will not be recovered. To date, the Company’s pharmaceutical customers have primarily been large pharmaceutical companies. As a result, bad debts from pharmaceutical accounts receivable to date have been minimal. Pharmaceutical company accounts receivable as of December 31, 2013 and March 31, 2014 were $1,892,384 and $892,162, respectively. There were no allowances for doubtful accounts recorded against these pharmaceutical accounts receivable at December 31, 2013 and March 31, 2014. | |||||||||||||||
ResponseDX® Accounts Receivable | |||||||||||||||
ResponseDX® accounts receivable are recorded from two primary payors: (1) Medicare and (2) third party payors such as commercial insurance and private payors or self-paying payors (“Private Payors”). ResponseDX® accounts receivable are recorded at established billing rates less an estimated billing adjustment, based on reporting models utilizing historical cash collection percentages and updated for current effective reimbursement factors. Management performs ongoing valuations of accounts receivable balances based on management’s evaluation of historical collection experience and industry trends. Based on the historical experience for our Medicare and Private Payor accounts, management has determined, based on a detailed analysis, that accounts receivable associated with certain billings are unlikely to be collected. Therefore, the Company has recorded an allowance for doubtful accounts of $2,404,659 and $ 1,751,567 as of December 31, 2013 and March 31, 2014, respectively. The Company’s bad debt expense for the three months ended March 31, 2013 and 2014 was $468,463 and $1,293,850, respectively. | |||||||||||||||
ResponseDX ® accounts receivable as of December 31, 2013 and March 31, 2014, consisted of the following: | |||||||||||||||
December 31, | March 31, | ||||||||||||||
2013 | 2014 | ||||||||||||||
(Unaudited) | |||||||||||||||
Net Medicare receivable | $ | 2,422,611 | $ | 2,223,793 | |||||||||||
Net Private Payor receivable | 4,315,587 | 4,164,121 | |||||||||||||
6,738,198 | 6,387,914 | ||||||||||||||
Allowance for doubtful accounts | -2,404,659 | -1,751,567 | |||||||||||||
Total | $ | 4,333,539 | $ | 4,636,347 | |||||||||||
Property and Equipment | ' | ||||||||||||||
Property and Equipment | |||||||||||||||
Property and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the double declining balance and straight-line methods over the estimated useful lives of the assets. The Company has determined the estimated useful lives of its property and equipment, as follows: | |||||||||||||||
Laboratory equipment | 5 to 7 years | ||||||||||||||
Furniture and equipment | 3 to 7 years | ||||||||||||||
Leasehold improvements | Shorter of the useful life (5 to 7 years) or the lease term | ||||||||||||||
Maintenance and repairs are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the related accounts and the resulting gain or loss is reflected in the statements of operations. | |||||||||||||||
Intangible Assets | ' | ||||||||||||||
Intangible Assets | |||||||||||||||
Intangible assets are carried at the cost to obtain them. Purchased software and internally-developed intangible assets are amortized using the straight-line method over estimated useful lives of three to five years. The Company has capitalized costs related to the development of database software (see Note 3). The portion of this database placed into service is amortized in accordance with ASC 350-40, Internal-Use Software. The amortization period is five years using the straight-line method. | |||||||||||||||
Revenue Recognition | ' | ||||||||||||||
Revenue Recognition | |||||||||||||||
Pharmaceutical Revenue | |||||||||||||||
Revenues that are derived from testing services provided to pharmaceutical companies are recognized on a contract specific basis pursuant to the terms of the related agreements. Revenue is recognized in accordance with ASC 605, Revenue Recognition, which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred and title and the risks and rewards of ownership have been transferred to the client or services have been rendered; (3) the price is fixed or determinable; and (4) collectability is reasonably assured. | |||||||||||||||
Revenues are recorded on an accrual basis as the contractual obligations are completed and as a set of assays is processed through the Company’s laboratory under a specified contractual protocol and are recorded on the date the tests are completed. Certain contracts have minimum assay requirements that, if not met, result in payments that are due upon the completion of the designated period. In these cases, revenues are recognized when the end of the specified contract period is reached. | |||||||||||||||
On occasion, the Company may enter into a contract that requires the client to provide an advance payment for specimens that will be processed at a later date. In these cases, the Company records this advance as deferred revenue and recognizes the revenue as the specimens are processed or at the end of the contract period, as appropriate. | |||||||||||||||
The Company recorded revenue from pharmaceutical clients of $2,441,693 and $577,381 for the three months ended March 31, 2013 and 2014, respectively. | |||||||||||||||
ResponseDX® Revenue | |||||||||||||||
Revenues that are derived from ResponseDX® testing services are recognized in accordance with ASC 605, Revenue Recognition, which requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence that an arrangement exists; (2) delivery has occurred and title and the risks and rewards of ownership have been transferred to the client or services have been rendered; (3) the price is fixed or determinable; and (4) collectability is reasonably assured. We record revenues when our tests have confirmed results, which are evidence that the services have been performed. | |||||||||||||||
Revenues are recorded on an accrual basis as the contractual obligations are completed and as a set of assays is processed through our laboratory under a specified contractual protocol. | |||||||||||||||
ResponseDX® Private Payor and Medicare revenues are recorded at established billing rates less an estimated billing adjustment, based on reporting models utilizing historical cash collection percentages and updated for current effective reimbursement factors. The Company’s Medicare provider number allows it to invoice and collect from Medicare. The Company’s invoicing to Medicare is primarily based on amounts allowed by Medicare for the service provided as defined by Common Procedural Terminology (“CPT”). | |||||||||||||||
The following details ResponseDX® revenue for the three months ended March 31, 2013 and 2014: | |||||||||||||||
Three Months | |||||||||||||||
Ended March 31, | |||||||||||||||
(Unaudited) | |||||||||||||||
2013 | 2014 | ||||||||||||||
Net Medicare revenue | $ | 1,344,215 | $ | 1,308,422 | |||||||||||
Net Private Payor revenue | 1,838,283 | 2,009,131 | |||||||||||||
Net ResponseDX® revenue | $ | 3,182,498 | $ | 3,317,553 | |||||||||||
Cost-Containment Measures | |||||||||||||||
Both government and private pay sources have instituted cost-containment measures designed to limit payments made to providers of health care services, which include diagnostic test providers such as the Company, and there can be no assurance that future measures designed to limit payments made to providers will not adversely affect the Company. | |||||||||||||||
Regulatory Matters | |||||||||||||||
A portion of the Company’s revenues are derived from Medicare reimbursement. Laws and regulations governing Medicare programs are complex and subject to change and to interpretation, and the Company may be adversely affected by future changes in the applicable laws and regulations and governmental investigations, lawsuits or private actions which include mandatory damages, fines, penalties, criminal charges, loss or suspension of licenses and/or suspension or exclusion from Medicare and certain other governmental programs. The Company believes that it is in compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving allegations of potential wrongdoing. | |||||||||||||||
Medicare reimbursement rates are also subject to regulatory changes and government funding restrictions. In January 2013, a Medicare fee schedule update was announced which included proposed changes to Medicare reimbursement rates that significantly reduced the reimbursement rates for certain of the testing services we provide. The Company participated with other impacted organizations to provide guidance to the local Medicare Administrative Contractor (“MAC”) that resulted in the local MAC updating certain pricing through September 2013 which reflected an increase in many of the tests originally priced in January 2013. On October 1, 2013, the Centers for Medicare and Medicaid Services (“CMS”) issued fees for some, but not all, of the CPT codes used by the Company. It is uncertain if continued guidance provided to Medicare and the local MAC by impacted organizations will result in additional fee increases or additional positive coverage determinations in 2014. If, however, the current reduction in reimbursement rates is adopted as is, it may have a material adverse effect on the Company's operations. | |||||||||||||||
As a result of these Current Procedural Terminology (“CPT”) code changes and Medicare price changes, we have experienced a departure from our normal reimbursement patterns with Medicare and other payors. Specifically, we have experienced delays in certain reimbursements for services and an increase in initial denials of claims for certain services provided. Accordingly, we re-evaluated the assumptions employed in our model for estimating revenue to be recognized for ResponseDX® testing. We view the code and price changes described above as affecting only the assumptions we used in pricing our services. The nature of the testing we provide, the evidence we gather to establish the creditworthiness of our payors and the delivery method of our services have not changed from prior periods, and there are no indicators that these assumptions require change. | |||||||||||||||
We performed an analysis that considered our historical patterns of revenue by payor in conjunction with the fluctuations we experienced in the three months ended March 31, 2013 and 2014 to arrive at the revenue recorded during those periods. We believe that the changes in CPT codes and pricing that are causing confusion and erratic payment experience in the payor community will take some time to resolve. The time needed for resolution will depend upon Medicare and the local MAC releasing additional pricing changes and potentially, revisions to previously revised prices, and upon the private payor community adopting the new CPT codes and some level of revised pricing. Accordingly, our revenue recognition estimates could be materially affected in future periods as pricing and payments patterns change and develop, and we may be materially affected by future or retroactive price changes. | |||||||||||||||
On July 8, 2013, CMS released a new proposed rulemaking entitled “Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule, Clinical Laboratory Fee Schedule & Other Revisions to Part B for CY 2014”. This proposed rule contains a number of provisions that may adversely impact the level of reimbursement for a variety of tests for which the Company receives reimbursement from the Medicare program beginning in 2014. Among other things, CMS has proposed examining approximately 1,200 laboratory tests that appear on the Clinical Lab Fee Schedule (“CLFS”) over a period of five years to determine whether advances in technology may have reduced the cost of providing such tests and whether or not the level of reimbursement should be revised. The Company is currently performing molecular testing which is reimbursed using CPT codes that fall on the CLFS. CMS has also proposed changing the methodology used to determine reimbursement rates for the technical component of certain tests reimbursed off of the Physician Fee Schedule (“PFS”). Among other provisions, CMS has proposed limiting the Relative Value Units (“RVUs”) ascribed to the Practice Expense component of their reimbursement formula for tests performed in “Non-Facilities” (which would include most clinical laboratories like the Company) to the RVUs that have been ascribed for the same procedures under the Hospital Outpatient Prospective Payment System, or the Ambulatory Payment Classification (“APC”) system which are used to reimburse “Facilities” (such as hospitals and ambulatory surgery centers). The Company currently performs FISH testing, which may be impacted by this PFS rule change if it is enacted. CMS has not yet proposed any specific rates for 2014 and the Company is examining the potential impact that a reduction in the level of reimbursement for the tests the Company offers may have on its operations. | |||||||||||||||
Additionally, CMS has as part of its regulatory structure the National Correct Coding Initiative (“NCCI”). Recent changes to NCCI guidance may reduce allowable quantities billed for FISH testing. These changes would lower reimbursement amounts for FISH tests, and there can be no assurance that CMS will make any modifications in the existing language of the NCCI documents. | |||||||||||||||
A number of proposals for legislation or regulation continue to be under discussion which could have the effect of substantially reducing Medicare reimbursements for clinical laboratories or introducing cost sharing to beneficiaries. Depending upon the nature of regulatory action, if any, which is taken and the content of legislation, if any, which is adopted, the Company could experience a significant decrease in revenues from Medicare and Medicaid, which could have a material adverse effect on the Company. The Company is unable to predict, however, the extent to which such actions will be taken. | |||||||||||||||
Cost of Revenue | ' | ||||||||||||||
Cost of Revenue | |||||||||||||||
Cost of revenue represents the cost of materials, direct labor, royalties, costs associated with processing tissue specimens including pathological review, staining, microdissection, paraffin extraction, reverse transcription polymerase chain reaction, fluorescence in situ hybridization (“FISH”), quality control analyses, license fees and delivery charges necessary to render an individualized test result. Costs associated with performing tests are recorded as the tests are processed. | |||||||||||||||
License Fees | ' | ||||||||||||||
License Fees | |||||||||||||||
The Company licenses technology for the extraction of RNA and DNA from FFPE tumor specimens from the University of Southern California (“USC”) in exchange for royalty fees on revenue generated by use of the technology. These royalties are calculated as a fixed percentage of revenue that we generate from use of the technology licensed from USC. We also maintain a non-exclusive license to use Roche Molecular Systems, Inc.’s (“Roche”) PCR, homogenous PCR, and reverse transcription PCR processes. We pay Roche a fixed percentage royalty fee for revenue that we generate through use of this technology. | |||||||||||||||
The Company is subject to potentially significant variations in royalties recorded in any period. While the amount paid is based on a fixed percentage from revenues of specific tests pursuant to terms set forth in the agreements with USC and Roche, the amount due is calculated based on the revenue we recognize using the respective licensed technology. As discussed above, this revenue can vary from period to period as it is dependent on the timing of the specimens submitted by our clients for testing. | |||||||||||||||
Additionally, the Company periodically analyzes the technical procedures performed in its test offerings to assess which activities utilize licensed technologies and to calculate royalties for use of the licensed technology. The most recent analyses indicate that the Company could owe less than the amounts that have been accrued for royalties payable. However, the licensors have not reviewed the Company’s updated royalty calculations. As a result, the Company has not reduced the historical accrued liability for royalties but has adjusted the current period accrual based on the revised calculation. | |||||||||||||||
Research and Development | ' | ||||||||||||||
Research and Development | |||||||||||||||
The Company expenses costs associated with research and development activities as incurred. Research and development costs are expensed as incurred and classified as research and development costs. Research and development costs include employee costs (salaries, payroll taxes, benefits, and travel), equipment depreciation and warranties and maintenance, laboratory supplies, primers and probes, reagents, patent costs and occupancy costs. | |||||||||||||||
Line of Credit | ' | ||||||||||||||
Line of Credit | |||||||||||||||
On July 14, 2011, the Company entered into a line of credit agreement with Silicon Valley Bank (the “Bank”). The agreement has been amended most recently on March 7, 2013. The line of credit is collateralized by the Company’s pharmaceutical, Private Payor and Medicare receivables. The amended maximum amount that can be borrowed from the credit line is $2,000,000. As of March 31, 2014, the amount the Company can draw from the line of credit was $1,000,000 calculated as the lesser of (i) the Company’s calculated borrowing base, which was 80% of certain of the Company’s accounts receivable, or (ii) the amount available under the credit line. As of March 31, 2014, the interest fees associated with this line of credit were set at the prime rate plus 1%. During 2013 and the three months ended March 31, 2014, the rate charged to the Company was 5%. As needed from time to time, the Company may draw on this line for use for general corporate purposes. As of December 31, 2013 and March 31, 2014, the Company had drawn $1,000,000 against the line of credit. The line of credit is subject to various financial covenants. At March 31, 2014, the Company was in compliance with the covenants. As of December 31, 2013, the Company was not in compliance with one of these covenants, and the Bank waived the covenant violation. Prior to the most recent amendment on March 7, 2013, the Company was also not in compliance with certain other covenants. The September 28, 2012 amendment provided forbearance for the failure to comply with these certain covenants through November 30, 2012, and modified the covenants to include a requirement that the Company maintain account balances at the Bank totaling a minimum of $4,000,000 during the covered forbearance period. The December 6, 2012 amendment to the agreement extended the forbearance for the failure to comply with these certain covenants and the requirement for the Company to maintain account balances at the Bank totaling a minimum of $4,000,000 during the forbearance period. In addition, pursuant to the March 7, 2013 amendment, the Bank waived the Company's existing breach of financial covenants under the credit agreement and the parties restructured the line of credit to provide that, among other things: (i) the revolving line of credit's maturity date was extended to March 7, 2015, (ii) the fee for the unused portion of the revolving line of credit was reduced from 0.375% to 0.250% per annum of the average unused portion of the revolving line of credit, (iii) the Company must continue to meet certain reporting requirements including providing financial statements and a certificate of compliance with the terms and conditions of the credit agreement by an authorized officer to the Bank within 45 days of the last day of each calendar quarter, provided that if the Company has less than $4,000,000 in its account at the Bank at any time during such calendar quarter, the Company must provide the financial statements and the certificate of compliance within 30 days of the end of such calendar quarter and provide a monthly report on revenues realized from Private Payors, (iv) the financial covenants were amended and restated to require the Company to maintain a ratio of quick assets to current liabilities of 1:50 to 1:00 and meet certain specified minimum adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) requirements as defined in the amendment and measured on a monthly basis and (v) the Bank is granted certain additional inspection of books, records and collateral rights. | |||||||||||||||
As of December 31, 2013, the line of credit under the credit agreement was classified as a non-current liability on the accompanying consolidated balance sheets as the line of credit had a maturity date of greater than one year from the date of the balance sheet. As of March 31, 2014, the line of credit under the credit agreement was classified as a current liability on the accompanying consolidated balance sheets as the line of credit had a maturity date of less than one year from the date of the balance sheet. | |||||||||||||||
From time to time, the Company’s calculated borrowing base under its Bank line of credit may decrease to a level where the Company is in an over-advance position in which case the Company will be required to repay any outstanding amounts greater than the calculated borrowing base for such covered period back to the Bank immediately. The Company will be able to draw down on the credit line again with respect to such paid back amount once the Company is in compliance with the borrowing base requirement. | |||||||||||||||
Income Taxes | ' | ||||||||||||||
Income Taxes | |||||||||||||||
Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. | |||||||||||||||
ASC 740, Income Taxes, clarifies the accounting for uncertainty in income taxes recognized in financial statements and requires the impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority. As of December 31, 2013 and March 31, 2014, the Company does not have a liability for unrecognized tax benefits. The Company recognizes interest and penalties associated with tax matters as part of the income tax provision and includes accrued interest and penalties with the related tax liability in the balance sheet. For the periods ended March 31, 2013 and 2014, interest and penalties totaling $107 and $0, respectively, were recorded in the consolidated statements of operations. | |||||||||||||||
Stock-Based Compensation | ' | ||||||||||||||
Stock-Based Compensation | |||||||||||||||
The Company accounts for stock-based compensation in accordance with ASC 718, Stock Compensation, Share-Based Payment. Stock-based compensation expense for all stock-based compensation awards granted is based on the grant-date fair value estimated in accordance with the provisions of ASC 718. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the option vesting period. | |||||||||||||||
The Company accounts for equity instruments issued to non-employees in accordance with ASC 505, Equity. Under ASC 505, stock option awards issued to non-employees are measured at fair value using the Black-Scholes option-pricing model and recognized pursuant to a performance model. | |||||||||||||||
Management Estimates | ' | ||||||||||||||
Management Estimates | |||||||||||||||
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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. Significant estimates in these condensed consolidated financial statements have been made for revenue, allowances for doubtful accounts, impairment of long-lived assets, depreciation of property and equipment and stock-based compensation. Actual results could differ materially from those estimates. | |||||||||||||||
Long-lived Assets | ' | ||||||||||||||
Long-lived Assets | |||||||||||||||
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company evaluates potential impairment by comparing the carrying amount of the asset with the estimated undiscounted future cash flows associated with the use of the asset and its eventual disposition. Should the review indicate that the assets cost is not recoverable, the carrying value of the asset would be reduced to its fair value, which is measured by future discounted cash flows. | |||||||||||||||
Foreign Currency Translation | ' | ||||||||||||||
Foreign Currency Translation | |||||||||||||||
The financial position and results of operations of the Company’s foreign subsidiary are determined using local currency as the functional currency. Assets and liabilities of these operations are translated at the exchange rate in effect at each period-end. Statement of Operations amounts are translated at the average rate of exchange prevailing during the period. Translation adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive loss in stockholders’ equity. | |||||||||||||||
Comprehensive Loss | ' | ||||||||||||||
Comprehensive Loss | |||||||||||||||
The components of comprehensive loss are accumulated net loss and unrealized foreign currency translation adjustments for the three months ended March 31, 2013 and 2014. | |||||||||||||||
Fair Value of Financial Instruments | ' | ||||||||||||||
Fair Value of Financial Instruments | |||||||||||||||
Cash and cash equivalents are stated at cost, which approximates fair market value. Cash equivalents consist of money market accounts, with fair values estimated based on quoted market prices. Debt balances are stated at historical amounts less principal payments, which approximate fair market value. The Company believes interest rates in its debt agreements are commensurate with lender risk profiles for similar companies. | |||||||||||||||
Advertising Costs | ' | ||||||||||||||
Advertising Costs | |||||||||||||||
The Company markets its services through its advertising activities in trade publications and on the internet. Advertising costs are included in selling and marketing expenses on the statements of operations and are expensed as incurred. Advertising costs for the three months ended March 31, 2013 and 2014 were $0 and $6,422, respectively. | |||||||||||||||
Concentration of Credit Risk and Clients and Limited Suppliers | ' | ||||||||||||||
Concentration of Credit Risk and Clients and Limited Suppliers | |||||||||||||||
Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. At March 31, 2014, the Company had $4,498,950 in cash and cash equivalents that exceeded federally insured limits. At March 31, 2014, $12,333 of cash was held outside of the United States. | |||||||||||||||
Revenue sources that account for greater than 10 percent of total revenue are provided below. | |||||||||||||||
Three Months Ended March 31, | |||||||||||||||
2013 | 2014 | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
Revenue | Percent of | Revenue | Percent of | ||||||||||||
Total | Total | ||||||||||||||
Revenue | Revenue | ||||||||||||||
Abbott Molecular, Inc. | $ | 910,182 | 16 | % | $ | 21,824 | * | % | |||||||
GlaxoSmithKline entities: | |||||||||||||||
GlaxoSmithKline LLC | $ | — | — | % | $ | — | — | % | |||||||
GlaxoSmithKline Biologicals S.A. | $ | 1,356,384 | 24 | % | $ | 328,281 | * | % | |||||||
Total GlaxoSmithKline entities | $ | 1,356,384 | 24 | % | $ | 328,281 | * | % | |||||||
Medicare, net of contractual allowances | $ | 1,344,215 | 24 | % | $ | 1,308,422 | 34 | % | |||||||
* Represents less than 10% of revenue. | |||||||||||||||
Customers that account for greater than 10 percent of gross accounts receivable are provided below. | |||||||||||||||
As of December 31, 2013 | As of March 31, 2014 | ||||||||||||||
(Unaudited) | |||||||||||||||
Receivable | Percent of | Receivable | Percent of | ||||||||||||
Balance | Total | Balance | Total | ||||||||||||
Receivables | Receivables | ||||||||||||||
GlaxoSmithKline entities: | |||||||||||||||
GlaxoSmithKline LLC | $ | 597,937 | * | % | $ | — | — | % | |||||||
GlaxoSmithKline Biologicals S.A. | $ | 544,298 | * | % | $ | 631,033 | * | % | |||||||
Total GlaxoSmithKline entities | $ | 1,691,144 | 13 | % | $ | 631,033 | * | % | |||||||
Medicare, net of contractual allowances | $ | 2,422,611 | 28 | % | $ | 2,223,793 | 31 | % | |||||||
* Represents less than 10% of accounts receivable. | |||||||||||||||
Many of the supplies and reagents used in the Company’s testing process are procured from a limited number of suppliers. Any supply interruption or an increase in demand beyond the suppliers’ capabilities could have an adverse impact on the Company’s business. Management believes it can identify alternative sources, if necessary, but it is possible such sources may not be identified in sufficient time to avoid an adverse impact on its business. The Company purchases certain laboratory supplies and reagents primarily from two suppliers. Purchases from these two suppliers accounted for approximately 65% and 74% of the Company’s reagent purchases for the three months ended March 31, 2013 and 2014, respectively. | |||||||||||||||
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Tables) | 3 Months Ended | ||||||||||||||
Mar. 31, 2014 | |||||||||||||||
Accounting Policies [Abstract] | ' | ||||||||||||||
Schedule of ResponseDX Accounts Receivable | ' | ||||||||||||||
ResponseDX® accounts receivable as of December 31, 2013 and March 31, 2014, consisted of the following: | |||||||||||||||
December 31, | March 31, | ||||||||||||||
2013 | 2014 | ||||||||||||||
(Unaudited) | |||||||||||||||
Net Medicare receivable | $ | 2,422,611 | $ | 2,223,793 | |||||||||||
Net Private Payor receivable | 4,315,587 | 4,164,121 | |||||||||||||
6,738,198 | 6,387,914 | ||||||||||||||
Allowance for doubtful accounts | -2,404,659 | -1,751,567 | |||||||||||||
Total | $ | 4,333,539 | $ | 4,636,347 | |||||||||||
Schedule of Estimated Useful Lives of Property and Equipment | ' | ||||||||||||||
The Company has determined the estimated useful lives of its property and equipment, as follows: | |||||||||||||||
Laboratory equipment | 5 to 7 years | ||||||||||||||
Furniture and equipment | 3 to 7 years | ||||||||||||||
Leasehold improvements | Shorter of the useful life (5 to 7 years) or the lease term | ||||||||||||||
Schedule of ResponseDX Revenue | ' | ||||||||||||||
The following details ResponseDX® revenue for the three months ended March 31, 2013 and 2014: | |||||||||||||||
Three Months | |||||||||||||||
Ended March 31, | |||||||||||||||
(Unaudited) | |||||||||||||||
2013 | 2014 | ||||||||||||||
Net Medicare revenue | $ | 1,344,215 | $ | 1,308,422 | |||||||||||
Net Private Payor revenue | 1,838,283 | 2,009,131 | |||||||||||||
Net ResponseDX® revenue | $ | 3,182,498 | $ | 3,317,553 | |||||||||||
Schedule of Revenue Sources that Account for Greater than 10 Percent of Total Revenue | ' | ||||||||||||||
Revenue sources that account for greater than 10 percent of total revenue are provided below. | |||||||||||||||
Three Months Ended March 31, | |||||||||||||||
2013 | 2014 | ||||||||||||||
(Unaudited) | (Unaudited) | ||||||||||||||
Revenue | Percent of | Revenue | Percent of | ||||||||||||
Total | Total | ||||||||||||||
Revenue | Revenue | ||||||||||||||
Abbott Molecular, Inc. | $ | 910,182 | 16 | % | $ | 21,824 | * | % | |||||||
GlaxoSmithKline entities: | |||||||||||||||
GlaxoSmithKline LLC | $ | — | — | % | $ | — | — | % | |||||||
GlaxoSmithKline Biologicals S.A. | $ | 1,356,384 | 24 | % | $ | 328,281 | * | % | |||||||
Total GlaxoSmithKline entities | $ | 1,356,384 | 24 | % | $ | 328,281 | * | % | |||||||
Medicare, net of contractual allowances | $ | 1,344,215 | 24 | % | $ | 1,308,422 | 34 | % | |||||||
* Represents less than 10% of revenue. | |||||||||||||||
Schedule of Customers that Account for Greater than 10 Percent of Accounts Receivable | ' | ||||||||||||||
Customers that account for greater than 10 percent of gross accounts receivable are provided below. | |||||||||||||||
As of December 31, 2013 | As of March 31, 2014 | ||||||||||||||
(Unaudited) | |||||||||||||||
Receivable | Percent of | Receivable | Percent of | ||||||||||||
Balance | Total | Balance | Total | ||||||||||||
Receivables | Receivables | ||||||||||||||
GlaxoSmithKline entities: | |||||||||||||||
GlaxoSmithKline LLC | $ | 597,937 | * | % | $ | — | — | % | |||||||
GlaxoSmithKline Biologicals S.A. | $ | 544,298 | * | % | $ | 631,033 | * | % | |||||||
Total GlaxoSmithKline entities | $ | 1,691,144 | 13 | % | $ | 631,033 | * | % | |||||||
Medicare, net of contractual allowances | $ | 2,422,611 | 28 | % | $ | 2,223,793 | 31 | % | |||||||
* Represents less than 10% of accounts receivable. | |||||||||||||||
Property_and_Equipment_and_Int1
Property and Equipment and Intangible Assets (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Property, Plant and Equipment [Abstract] | ' | |||||||
Schedule of Property and Equipment | ' | |||||||
Property and equipment and intangible assets consist of the following: | ||||||||
December 31, | March 31, | |||||||
2013 | 2014 | |||||||
(Unaudited) | ||||||||
Laboratory equipment | $ | 4,468,055 | $ | 4,475,415 | ||||
Furniture and equipment | 736,886 | 750,886 | ||||||
Leasehold improvements | 487,843 | 496,523 | ||||||
5,692,784 | 5,722,824 | |||||||
Less: Accumulated depreciation | -3,758,202 | -3,956,167 | ||||||
Total property and equipment, net | $ | 1,934,582 | $ | 1,766,657 | ||||
Purchased software | $ | 749,587 | $ | 764,105 | ||||
Internally developed software | 213,361 | 213,361 | ||||||
Trademarks | 33,000 | 33,000 | ||||||
995,948 | 1,010,466 | |||||||
Less: Accumulated amortization | -228,725 | -237,642 | ||||||
Total intangible assets, net | $ | 767,223 | $ | 772,824 | ||||
Schedule of Capital Leased Assets | ' | |||||||
This equipment is included in property and equipment on the accompanying consolidated balance sheet as of March 31, 2014 as follows: | ||||||||
(Unaudited) | ||||||||
Equipment purchased under capital leases | $ | 584,150 | ||||||
Less: Accumulated amortization | -369,449 | |||||||
Equipment purchased under capital leases, net | $ | 214,701 | ||||||
Schedule of Future Minimum Lease Payments Under Capital Leases | ' | |||||||
Future minimum lease payments under capital leases as of March 31, 2014 are as follows: | ||||||||
Years ending December 31, | (Unaudited) | |||||||
2014 | $ | 130,431 | ||||||
2015 | 101,309 | |||||||
2016 | 46,852 | |||||||
Total minimum lease payments | 278,592 | |||||||
Less amount represented by interest | -32,979 | |||||||
Less current portion | -129,456 | |||||||
Capital lease obligation, net of current portion | $ | 116,157 | ||||||
Loss_Per_Share_Tables
Loss Per Share (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Earnings Per Share [Abstract] | ' | |||||||
Computation for Basic and Diluted Loss Per Share | ' | |||||||
The following table sets forth the computation for basic and diluted loss per share: | ||||||||
Three Months Ended March 31, | ||||||||
2013 | 2014 | |||||||
(Unaudited) | (Unaudited) | |||||||
Numerator: | ||||||||
Net loss | $ | -824,304 | $ | -3,504,439 | ||||
Numerator for basic and diluted earnings per share | $ | -824,304 | $ | -3,504,439 | ||||
Denominator: | ||||||||
Denominator for basic and diluted earnings per share — weighted-average shares outstanding | 32,797,625 | 38,718,336 | ||||||
Basic and diluted loss per share | $ | -0.03 | $ | -0.09 | ||||
Commitments_and_Contingencies_
Commitments and Contingencies (Tables) | 3 Months Ended | ||||
Mar. 31, 2014 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
Schedule of Future Minimum Lease Payments under Noncancelable Operating Leases | ' | ||||
Future minimum lease payments by year and in the aggregate, under the Company’s non-cancelable operating leases for facilities, equipment and software as a service, consist of the following at March 31, 2014: | |||||
Years Ending December 31, | Unaudited | ||||
2014 | $ | 710,160 | |||
2015 | 522,518 | ||||
2016 | 35,807 | ||||
Total | $ | 1,268,485 | |||
Stock_Option_Plans_Tables
Stock Option Plans (Tables) | 3 Months Ended | ||||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||||||||||
Schedule of Assumptions Used to Estimate Share-Based Compensation Expense Using Black-Scholes Model | ' | ||||||||||||||||||
Except for certain grants of restricted common stock and common stock options containing market conditions as described below, the Company estimated share-based compensation expense for the three months ended March 31, 2013 using the Black-Scholes model with the following weighted average assumptions: | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
31-Mar-13 | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
Risk free interest rate | 1.03-1.14 | % | |||||||||||||||||
Expected dividend yield | — | ||||||||||||||||||
Expected volatility | 104.0-104.9 | % | |||||||||||||||||
Expected term **(in years) | 6.25 | ||||||||||||||||||
Forfeiture rate | 7 | % | |||||||||||||||||
No options were granted during the three months ended March 31, 2014. | |||||||||||||||||||
** Expected term is calculated using SAB 107, Simplified Formula. Management has concluded that the use of the simplified method for calculating the expected term of its common stock option grants is appropriate given the Company’s lack of history of option exercises. | |||||||||||||||||||
Summary of Stock Option Activity | ' | ||||||||||||||||||
The following table summarizes the stock option activity for the 2006 Plan for the three months ended March 31, 2014: | |||||||||||||||||||
Weighted | |||||||||||||||||||
Average | Remaining | Aggregate | |||||||||||||||||
Number of | Exercise | Contractual | Intrinsic | ||||||||||||||||
Shares | Price | Life (Years) | Value | ||||||||||||||||
Outstanding, December 31, 2013 | 2,288,076 | $ | 1.83 | 8.41 | $ | 1,082 | |||||||||||||
Granted (Unaudited) | — | $ | — | — | — | ||||||||||||||
Exercised (Unaudited) | -15,300 | $ | 1.16 | 8.33 | 6,007 | ||||||||||||||
Expired (Unaudited) | — | — | — | — | |||||||||||||||
Forfeited (Unaudited) | -55,642 | $ | 1.36 | — | 110 | ||||||||||||||
Outstanding, March 31, 2014 (Unaudited) | 2,217,134 | $ | 1.85 | 8.14 | $ | 14,054 | |||||||||||||
Exercisable, March 31, 2014 (Unaudited) | 1,004,823 | $ | 2.46 | 8.05 | $ | 8,042 | |||||||||||||
Schedule of Options Outstanding | ' | ||||||||||||||||||
The following table provides additional information regarding options outstanding under the 2006 Plan as of March 31, 2014 (unaudited): | |||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||
Exercise Price | Number of | WA | Number of | WA | |||||||||||||||
Options | Remaining | Options | Remaining | ||||||||||||||||
Contractual | Contractual | ||||||||||||||||||
Term | Term | ||||||||||||||||||
$ | 1.00 to 1.99 | 1,712,134 | 8.86 | 558,810 | 7.92 | ||||||||||||||
2.00 to 2.99 | 287,500 | 7.32 | 228,513 | 7.19 | |||||||||||||||
3.00 to 3.99 | 71,000 | 4.33 | 71,000 | 4.33 | |||||||||||||||
4.29 | 11,500 | 3.4 | 11,500 | 3.4 | |||||||||||||||
7 | 135,000 | 3.19 | 135,000 | 3.19 | |||||||||||||||
2,217,134 | 8.14 | 1,004,823 | 6.81 | ||||||||||||||||
Schedule of Stock Based Compensation Included in Results of Operations | ' | ||||||||||||||||||
Stock-based compensation expense was classified as follows in the results of operation: | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
March 31, | |||||||||||||||||||
( Unaudited ) | |||||||||||||||||||
2013 | 2014 | ||||||||||||||||||
Cost of revenue | $ | 13,487 | $ | 11,256 | |||||||||||||||
Research and development | 9,842 | 13,197 | |||||||||||||||||
Sales and marketing | 17,400 | 15,749 | |||||||||||||||||
General and administrative | 64,595 | 144,567 | |||||||||||||||||
Totals | $ | 105,324 | $ | 184,769 | |||||||||||||||
Schedule of Awards to Mr. Bologna | ' | ||||||||||||||||||
The following table summarizes these awards to Mr. Bologna: | |||||||||||||||||||
Intrinsic | |||||||||||||||||||
Value as of | Options | Remaining | |||||||||||||||||
March 31, | Options | Contractual | |||||||||||||||||
Type | Grant Date | Number of Awards | 2014 | Exercise Price | Exercisable | Term | |||||||||||||
Restricted Shares of Common Stock | 12/21/11 | 270,000 | $ | 321,300 | $ | — | — | 7.7 | |||||||||||
Options | 12/21/11 | 600,000 | $ | — | $ | 1.2 | 400,000 | 7.7 | |||||||||||
Options | 12/21/11 | 300,000 | $ | — | $ | 1.2 | 300,000 | 7.7 | |||||||||||
Segment_Information_Tables
Segment Information (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Segment Reporting [Abstract] | ' | |||||||
Schedule of Financial Information by Geographic Area | ' | |||||||
The following tables contain certain financial information by geographic area: | ||||||||
Three Months Ended March 31, | ||||||||
2013 | 2014 | |||||||
(Unaudited) | (Unaudited) | |||||||
Net revenue: | ||||||||
United States | $ | 4,153,172 | $ | 3,546,903 | ||||
Europe | 1,361,249 | 342,601 | ||||||
Japan | 109,770 | 5,430 | ||||||
$ | 5,624,191 | $ | 3,894,934 | |||||
December 31, | March 31, | |||||||
2013 | 2014 | |||||||
(Unaudited) | ||||||||
Long-lived assets: | ||||||||
United States | $ | 2,701,805 | $ | 2,539,481 | ||||
Sale_of_Common_Stock_Tables
Sale of Common Stock (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Stockholders Equity Note [Abstract] | ' | |||||||
Schedule of Common Stock Classified Outside of Stockholders' Equity | ' | |||||||
Activity in common stock classified outside of stockholders’ equity was as follows: | ||||||||
Number of | Amount | |||||||
Shares | ||||||||
Balance, December 31, 2013 | 5,000,000 | $ | 5,500,000 | |||||
Issuance of common stock classified outside of stockholders’ equity | — | — | ||||||
Reclassification to stockholders’ equity | — | — | ||||||
Balance, March 31, 2014 (unaudited) | 5,000,000 | $ | 5,500,000 | |||||
Fair_Value_Measurements_Tables
Fair Value Measurements (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
Fair Value Disclosures [Abstract] | ' | |||||||||||||
Schedule of Fair Value of Assets and Liabilities Measured on Recurring Basis | ' | |||||||||||||
The fair value of these assets was determined using the following inputs in accordance with ASC 820 at December 31, 2012 and March 31, 2013: | ||||||||||||||
Fair Value Measurement as of March 31, 2013 | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
Description | $ | $ | $ | $ | ||||||||||
Money market accounts (1) | 10,000 | 10,000 | — | — | ||||||||||
Fair Value Measurement as of March 31, 2014 | ||||||||||||||
(Unaudited) | ||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||
Description | $ | $ | $ | $ | ||||||||||
Money market accounts (1) | — | — | — | — | ||||||||||
-1 | Included in cash and cash equivalents on the accompanying consolidated balance sheets. | |||||||||||||
Organization_Operations_and_Ba1
Organization, Operations and Basis of Accounting (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Organization, Consolidation And Presentation Of Financial Statements [Line Items] | ' | ' |
Accumulated deficit | ($68,801,618) | ($65,297,179) |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies (Details) (USD $) | 2 Months Ended | 3 Months Ended | ||||
Mar. 07, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | Sep. 28, 2012 | |
Significant Accounting Policies [Line Items] | ' | ' | ' | ' | ' | ' |
Receivable Balance,net allowances for doubtful debts | ' | $5,528,509 | ' | $6,225,923 | ' | ' |
Allowance for doubtful accounts | ' | 1,751,567 | ' | 2,404,659 | ' | ' |
Revenue from pharmaceutical clients | ' | 577,381 | 2,441,693 | ' | ' | ' |
Bad debt expense | ' | 1,293,850 | 468,463 | ' | ' | ' |
Line of credit, expiration date | 7-Mar-15 | ' | ' | ' | ' | ' |
Line of credit, fee for unused portion | 0.25% | 0.38% | ' | ' | ' | ' |
Line of credit, maximum borrowing capacity | ' | 2,000,000 | ' | ' | ' | ' |
Line of credit facility, current borrowing capacity | ' | 1,000,000 | ' | ' | ' | ' |
Line of credit, borrowing base percentage of pharmaceutical accounts receivable | ' | 80.00% | ' | ' | ' | ' |
Line of credit, interest above prime rate | ' | 1.00% | ' | ' | ' | ' |
Line of credit, interest charged | ' | 5.00% | 5.00% | ' | ' | ' |
Line of credit, amount drawn | ' | 1,000,000 | ' | 1,000,000 | ' | ' |
Required minimum bank balance | ' | 4,000,000 | ' | ' | 4,000,000 | 4,000,000 |
Advertising costs | ' | 6,422 | 0 | ' | ' | ' |
Uninsured foreign cash balance | ' | 12,333 | ' | ' | ' | ' |
Line of Credit Facility,Agreement Date | ' | 14-Jul-11 | ' | ' | ' | ' |
Cash and cash equivalents that exceeded federally insured limits | ' | 4,498,950 | ' | ' | ' | ' |
Income Tax Examination, Penalties and Interest Expense, Total | ' | 0 | 107 | ' | ' | ' |
Property, Plant and Equipment, Useful Life | ' | '5 years | ' | ' | ' | ' |
Maximum [Member] | Purchased And Internally Developed Software Intangible Asset [Member] | ' | ' | ' | ' | ' | ' |
Significant Accounting Policies [Line Items] | ' | ' | ' | ' | ' | ' |
Finite-Lived Intangible Asset, Useful Life | ' | '5 years | ' | ' | ' | ' |
Minimum [Member] | Purchased And Internally Developed Software Intangible Asset [Member] | ' | ' | ' | ' | ' | ' |
Significant Accounting Policies [Line Items] | ' | ' | ' | ' | ' | ' |
Finite-Lived Intangible Asset, Useful Life | ' | '3 years | ' | ' | ' | ' |
Cost of Goods, Total [Member] | Supplier Concentration Risk [Member] | ' | ' | ' | ' | ' | ' |
Significant Accounting Policies [Line Items] | ' | ' | ' | ' | ' | ' |
Concentration risk percentage | ' | 74.00% | 65.00% | ' | ' | ' |
Clinical [Member] | ' | ' | ' | ' | ' | ' |
Significant Accounting Policies [Line Items] | ' | ' | ' | ' | ' | ' |
Receivable Balance,net allowances for doubtful debts | ' | 892,162 | ' | 1,892,384 | ' | ' |
Payment period from the date of invoice | ' | '45 days | ' | ' | ' | ' |
ResponseDX [Member] | ' | ' | ' | ' | ' | ' |
Significant Accounting Policies [Line Items] | ' | ' | ' | ' | ' | ' |
Allowance for doubtful accounts | ' | 1,751,567 | ' | 2,404,659 | ' | ' |
Bad debt expense | ' | $1,293,850 | $468,463 | ' | ' | ' |
Summary_of_Significant_Account4
Summary of Significant Accounting Policies (Schedule of ResponseDX Accounts Receivable) (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' |
Allowance for doubtful accounts | ($1,751,567) | ($2,404,659) |
Total | 5,528,509 | 6,225,923 |
ResponseDX [Member] | ' | ' |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' |
Accounts receivable | 6,387,914 | 6,738,198 |
Allowance for doubtful accounts | -1,751,567 | -2,404,659 |
Total | 4,636,347 | 4,333,539 |
ResponseDX [Member] | Medicare [Member] | ' | ' |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' |
Accounts receivable | 2,223,793 | 2,422,611 |
Private Payor [Member] | ResponseDX [Member] | ' | ' |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' |
Accounts receivable | $4,164,121 | $4,315,587 |
Summary_of_Significant_Account5
Summary of Significant Accounting Policies (Schedule of Estimated Useful Lives) (Details) | 3 Months Ended |
Mar. 31, 2014 | |
Property, Plant and Equipment [Line Items] | ' |
Property, Plant and Equipment, Useful Life | '5 years |
Laboratory Equipment [Member] | Minimum [Member] | ' |
Property, Plant and Equipment [Line Items] | ' |
Property, Plant and Equipment, Useful Life | '5 years |
Laboratory Equipment [Member] | Maximum [Member] | ' |
Property, Plant and Equipment [Line Items] | ' |
Property, Plant and Equipment, Useful Life | '7 years |
Furniture and Equipment [Member] | Minimum [Member] | ' |
Property, Plant and Equipment [Line Items] | ' |
Property, Plant and Equipment, Useful Life | '3 years |
Furniture and Equipment [Member] | Maximum [Member] | ' |
Property, Plant and Equipment [Line Items] | ' |
Property, Plant and Equipment, Useful Life | '7 years |
Leasehold Improvements [Member] | Minimum [Member] | ' |
Property, Plant and Equipment [Line Items] | ' |
Property, Plant and Equipment, Useful Life | '5 years |
Leasehold Improvements [Member] | Maximum [Member] | ' |
Property, Plant and Equipment [Line Items] | ' |
Property, Plant and Equipment, Useful Life | '7 years |
Summary_of_Significant_Account6
Summary of Significant Accounting Policies (Schedule of ResponseDX Revenue) (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' |
Net ResponseDX B. revenue | $3,894,934 | $5,624,191 |
ResponseDX [Member] | ' | ' |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' |
Net ResponseDX B. revenue | 3,317,553 | 3,182,498 |
ResponseDX [Member] | Private Payor [Member] | ' | ' |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' |
Net ResponseDX B. revenue | 2,009,131 | 1,838,283 |
Medicare [Member] | ResponseDX [Member] | ' | ' |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' |
Net ResponseDX B. revenue | $1,308,422 | $1,344,215 |
Summary_of_Significant_Account7
Summary of Significant Accounting Policies (Schedule of Revenue Sources that Account for Greater than 10 Percent of Total Revenue) (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | ||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' | |
Revenue | $3,894,934 | $5,624,191 | |
Abbott Molecular, Inc. [Member] | ' | ' | |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' | |
Revenue | 21,824 | 910,182 | |
Percent of Total Revenue | ' | [1] | 16.00% |
GlaxoSmithKline LLC[Member] | ' | ' | |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' | |
Revenue | 0 | 0 | |
Percent of Total Revenue | 0.00% | 0.00% | |
GlaxoSmithKline Biologicals S.A. [Member] | ' | ' | |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' | |
Revenue | 328,281 | 1,356,384 | |
Percent of Total Revenue | ' | [1] | 24.00% |
GlaxoSmithKline Entities [Member] | ' | ' | |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' | |
Revenue | 328,281 | 1,356,384 | |
Percent of Total Revenue | ' | [1] | 24.00% |
Medicare [Member] | ' | ' | |
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' | |
Revenue | $1,308,422 | $1,344,215 | |
Percent of Total Revenue | 34.00% | 24.00% | |
[1] | Represents less than 10% of revenue. |
Summary_of_Significant_Account8
Summary of Significant Accounting Policies (Schedule of Customers that Account for Greater than 10 Percent of Accounts Receivable) (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | ||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' | ||
Receivable Balance | $5,528,509 | $6,225,923 | ||
GlaxoSmithKline, LLC [Member] | ' | ' | ||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' | ||
Receivable Balance | 0 | 597,937 | ||
Percent of Total Receivables | 0.00% | ' | [1] | |
GlaxoSmithKline Biologicals S.A. [Member] | ' | ' | ||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' | ||
Receivable Balance | 631,033 | 544,298 | ||
Percent of Total Receivables | ' | [1] | ' | [1] |
GlaxoSmithKline Entities [Member] | ' | ' | ||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' | ||
Receivable Balance | 631,033 | 1,691,144 | ||
Percent of Total Receivables | ' | [1] | 13.00% | |
Medicare [Member] | ' | ' | ||
Health Care Organization, Receivable and Revenue Disclosures [Line Items] | ' | ' | ||
Receivable Balance | $2,223,793 | $2,422,611 | ||
Percent of Total Receivables | 31.00% | 28.00% | ||
[1] | Represents less than 10% of accounts receivable. |
Property_and_Equipment_and_Int2
Property and Equipment and Intangible Assets (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Property, Plant and Equipment [Line Items] | ' | ' |
Amortization Expenses | $206,884 | $137,401 |
Property_and_Equipment_and_Int3
Property and Equipment and Intangible Assets (Schedule of Property and Equipment and Intangible Assets) (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Property, Plant and Equipment [Line Items] | ' | ' |
Property and equipment, gross | $5,722,824 | $5,692,784 |
Less: Accumulated depreciation | -3,956,167 | -3,758,202 |
Total property and equipment, net | 1,766,657 | 1,934,582 |
Intangible assets | 1,010,466 | 995,948 |
Less: Accumulated amortization | -237,642 | -228,725 |
Total intangible assets, net | 772,824 | 767,223 |
Purchased Software [Member] | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Intangible assets | 764,105 | 749,587 |
Trademarks [Member] | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Intangible assets | 33,000 | 33,000 |
Internally developed software [Member] | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Intangible assets | 213,361 | 213,361 |
Laboratory Equipment [Member] | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Property and equipment, gross | 4,475,415 | 4,468,055 |
Furniture and Equipment [Member] | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Property and equipment, gross | 750,886 | 736,886 |
Leasehold Improvements [Member] | ' | ' |
Property, Plant and Equipment [Line Items] | ' | ' |
Property and equipment, gross | $496,523 | $487,843 |
Property_and_Equipment_and_Int4
Property and Equipment and Intangible Assets (Schedule of Capital Leased Assets) (Details) (USD $) | Mar. 31, 2014 |
Property, Plant and Equipment [Line Items] | ' |
Equipment purchased under capital leases | $584,150 |
Less: Accumulated amortization | -369,449 |
Equipment purchased under capital leases, net | $214,701 |
Property_and_Equipment_and_Int5
Property and Equipment and Intangible Assets (Schedule of Future Minimum Lease Payments under Capital Leases) (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Property, Plant and Equipment [Line Items] | ' | ' |
Years ending December 31, 2014 | $130,431 | ' |
Years ending December 31, 2015 | 101,309 | ' |
Years ending December 31, 2016 | 46,852 | ' |
Total minimum lease payments | 278,592 | ' |
Less amount represented by interest | -32,979 | ' |
Less current portion | -129,456 | -157,238 |
Capital lease obligation, net of current portion | $116,157 | $136,419 |
Loss_Per_Share_Details
Loss Per Share (Details) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Earnings Per Share, Basic, by Common Class, Including Two Class Method [Line Items] | ' | ' |
Number of shares excluded from the calculation of diluted loss per share | 2,217,134 | 1,711,643 |
Loss_Per_Share_Computation_for
Loss Per Share (Computation for Basic and Diluted Loss Per Share) (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Numerator: | ' | ' |
Net loss | ($3,504,439) | ($824,304) |
Numerator for basic and diluted earnings per share | ($3,504,439) | ($824,304) |
Denominator: | ' | ' |
Denominator for basic and diluted earnings per share B weighted-average shares outstanding | 38,718,336 | 32,797,625 |
Basic and diluted loss per share | ($0.09) | ($0.03) |
Commitments_and_Contingencies_1
Commitments and Contingencies (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Commitments And Contingencies Disclosure [Line Items] | ' | ' |
Rent expense | $212,181 | $160,790 |
California State [Member] | ' | ' |
Commitments And Contingencies Disclosure [Line Items] | ' | ' |
Operating leases, space | 27,446 | ' |
Operating lease expiration date | 30-Jun-15 | ' |
Maryland [Member] | ' | ' |
Commitments And Contingencies Disclosure [Line Items] | ' | ' |
Operating leases, space | 1,460 | ' |
Operating lease expiration date | 31-Jan-13 | ' |
Commitments_and_Contingencies_2
Commitments and Contingencies (Schedule of Future Minimum Lease Payments under Noncancelable Operating Leases) (Details) (USD $) | Mar. 31, 2014 |
Commitments And Contingencies Disclosure [Line Items] | ' |
2014 | $710,160 |
2015 | 522,518 |
2016 | 35,807 |
Total | $1,268,485 |
License_and_Collaborative_Agre1
License and Collaborative Agreements (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Licensing Agreements [Member] | University of Southern California [Member] | ' | ' |
License and Collaborative Agreements [Line Items] | ' | ' |
Revenue | $10,961 | $104,105 |
Licensing Agreements [Member] | Roche Molecular Systems [Member] | ' | ' |
License and Collaborative Agreements [Line Items] | ' | ' |
Revenue | 44,373 | 90,145 |
Service Agreements [Member] | Taiho Pharmaceutical Co., Ltd. [Member] | ' | ' |
License and Collaborative Agreements [Line Items] | ' | ' |
Revenue recognized | 0 | 33,920 |
Service Agreements [Member] | GlaxoSmithKline, LLC [Member] | ' | ' |
License and Collaborative Agreements [Line Items] | ' | ' |
Collaborative agreement, optional additional period | '1 year | ' |
Collaborative agreement, term | '2 years | ' |
Service Agreements [Member] | GSK Bio [Member] | ' | ' |
License and Collaborative Agreements [Line Items] | ' | ' |
Revenue recognized | $328,281 | $1,356,384 |
Collaborative agreement, termination notice period | '90 days | ' |
Stock_Option_Plans_Details
Stock Option Plans (Details) (USD $) | 3 Months Ended | 3 Months Ended | 1 Months Ended | 3 Months Ended | 1 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | ||||||||||||||||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2000 | Mar. 31, 2014 | Mar. 31, 2000 | Mar. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2012 | Dec. 31, 2011 | Dec. 31, 2010 | Dec. 31, 2009 | Dec. 31, 2008 | Oct. 26, 2006 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | |
Non-employee option [Member] | Non-employee option [Member] | Stock Option [Member] | Stock Option [Member] | Stock Option Plan 2000 [Member] | Stock Option Plan 2000 [Member] | 2006 Stock Plan [Member] | 2006 Stock Plan [Member] | 2006 Stock Plan [Member] | 2006 Stock Plan [Member] | 2006 Stock Plan [Member] | 2006 Stock Plan [Member] | 2006 Stock Plan [Member] | Thomos Bologna [Member] | Thomos Bologna [Member] | Thomos Bologna [Member] | Thomos Bologna [Member] | Thomos Bologna [Member] | Thomos Bologna [Member] | Thomos Bologna [Member] | Thomos Bologna [Member] | ||||
Maximum [Member] | Minimum [Member] | Restricted Stock Units (RSUs) [Member] | Restricted Stock Units (RSUs) [Member] | Stock Option [Member] | Stock Option [Member] | Stock Option [Member] | Stock Option [Member] | |||||||||||||||||
Minimum [Member] | Minimum [Member] | Period One [Member] | Period Two [Member] | |||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Number of shares authorized | ' | ' | ' | ' | ' | ' | ' | ' | 210,000 | 3,770,000 | ' | ' | ' | ' | ' | 2,160,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Stock option granted, number of common stock shares | 0 | ' | ' | ' | ' | 16,000 | ' | 1,600,000 | ' | 1,552,866 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 600,000 | ' | ' | 300,000 |
Increase in the number of shares available for issuance | ' | ' | ' | ' | ' | ' | ' | ' | ' | 200,000 | 200,000 | 200,000 | 200,000 | 200,000 | 200,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Increase in the number of shares available for issuance, percent of stock outstanding | ' | ' | ' | ' | ' | ' | ' | ' | ' | 5.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options expiration period | ' | ' | ' | ' | ' | ' | '10 years | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options vesting period | ' | ' | ' | '3 years | '2 years | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '36 months | ' | ' | ' |
Options outstanding, weighted average exercise price | $1.85 | ' | $1.83 | ' | ' | ' | ' | ' | ' | $1.85 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Non-vested stock options outstanding, Weighted average grant date fair value | $1.34 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock options granted, average fair value | $1.39 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Average closing price of common stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $2.40 | ' | ' | ' | ' |
Number of days, for calculating average closing price of common stock | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '30 years | ' | ' |
Number of restricted common stock granted | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 270,000 | ' | ' | ' | ' | ' |
Stock option granted, exercise price | $0 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $1.20 | ' |
Share-based compensation | $184,769 | $105,324 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $44,531 | $44,531 | ' | ' | ' | ' | ' | ' |
Non-vested stock options | 1,212,311 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unrecognized compensation cost related to non-vested share-based compensation arrangements granted | $969,580 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Share Based Compensation Arrangement By Share Based Payment Award Options Non Vested Weighted Average Remaining Period | '2 years 8 months 12 days | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Stock_Option_Plans_Schedule_of
Stock Option Plans (Schedule of Assumptions Used to Estimate Share-Based Compensation Expense Using Black-Scholes Model) (Details) | 3 Months Ended | |
Mar. 31, 2013 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | |
Expected dividend yield | 0.00% | |
Expected term (in years) | '6 years 3 months | [1] |
Forfeiture rate | 7.00% | |
Maximum [Member] | ' | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | |
Risk free interest rate | 1.14% | |
Expected volatility | 104.90% | |
Minimum [Member] | ' | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' | |
Risk free interest rate | 1.03% | |
Expected volatility | 104.00% | |
[1] | Expected term is calculated using SAB 107, Simplified Formula. Management has concluded that the use of the simplified method for calculating the expected term of its common stock option grants is appropriate given the Companybs lack of history of option exercises. |
Stock_Option_Plans_Summary_of_
Stock Option Plans (Summary of Stock Option Activity) (Details) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2013 | |
Number of Shares | ' | ' |
Outstanding, December 31, 2013 | 2,288,076 | ' |
Granted | 0 | ' |
Exercised | -15,300 | ' |
Expired | 0 | ' |
Forfeited | -55,642 | ' |
Outstanding, March 31, 2014 (Unaudited) | 2,217,134 | 2,288,076 |
Exercisable, March 31, 2014 (Unaudited) | 1,004,823 | ' |
Weighted Average Exercise Price | ' | ' |
Outstanding, December 31, 2013 | $1.83 | ' |
Granted | $0 | ' |
Exercised | $1.16 | ' |
Expired | $0 | ' |
Forfeited | $1.36 | ' |
Outstanding, Ending balance | $1.85 | $1.83 |
Outstanding, March 31, 2014 (Unaudited) | $2.46 | ' |
Remaining Contractual Life (Years) | ' | ' |
Exercised | '8 years 3 months 29 days | '8 years 4 months 28 days |
Outstanding (in years) | '8 years 1 month 20 days | ' |
Exercisable, March 31, 2014 | '8 years 18 days | ' |
Aggregate Intrinsic Value | ' | ' |
Outstanding, December 31,2013 | $1,082 | ' |
Granted | 0 | ' |
Exercised | 6,007 | ' |
Expired | 0 | ' |
Forfeited | 110 | ' |
Outstanding, March 31, 2014 | 14,054 | 1,082 |
Exercisable, March 31, 2014 | $8,042 | ' |
Stock_Option_Plans_Schedule_of1
Stock Option Plans (Schedule of Options Outstanding) (Details) | 3 Months Ended |
Mar. 31, 2014 | |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ' |
Options Outstanding Number of Options | 2,217,134 |
Options Outstanding WA Remaining Contractual Term | '8 years 1 month 20 days |
Options Exercisable Number of Options | 1,004,823 |
Options Exercisable WA Remaining Contractual Term | '6 years 9 months 22 days |
$ 1.00 to 1.99 [Member] | ' |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ' |
Options Outstanding Number of Options | 1,712,134 |
Options Outstanding WA Remaining Contractual Term | '8 years 10 months 10 days |
Options Exercisable Number of Options | 558,810 |
Options Exercisable WA Remaining Contractual Term | '7 years 11 months 1 day |
$ 2.00 to 2.99 [Member] | ' |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ' |
Options Outstanding Number of Options | 287,500 |
Options Outstanding WA Remaining Contractual Term | '7 years 3 months 25 days |
Options Exercisable Number of Options | 228,513 |
Options Exercisable WA Remaining Contractual Term | '7 years 2 months 8 days |
$ 3.00 to 3.99 [Member] | ' |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ' |
Options Outstanding Number of Options | 71,000 |
Options Outstanding WA Remaining Contractual Term | '4 years 3 months 29 days |
Options Exercisable Number of Options | 71,000 |
Options Exercisable WA Remaining Contractual Term | '4 years 3 months 29 days |
$ 4.29 [Member] | ' |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ' |
Options Outstanding Number of Options | 11,500 |
Options Outstanding WA Remaining Contractual Term | '3 years 4 months 24 days |
Options Exercisable Number of Options | 11,500 |
Options Exercisable WA Remaining Contractual Term | '3 years 4 months 24 days |
$ 7.00 [Member] | ' |
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items] | ' |
Options Outstanding Number of Options | 135,000 |
Options Outstanding WA Remaining Contractual Term | '3 years 2 months 8 days |
Options Exercisable Number of Options | 135,000 |
Options Exercisable WA Remaining Contractual Term | '3 years 2 months 8 days |
Stock_Option_Plans_Schedule_of2
Stock Option Plans (Schedule of Stock-Based Compensation Included in Results of Operations) (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Stock-based compensation | $184,769 | $105,324 |
Cost of revenue [Member] | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Stock-based compensation | 11,256 | 13,487 |
Research and development [Member] | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Stock-based compensation | 13,197 | 9,842 |
Sales and marketing [Member] | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Stock-based compensation | 15,749 | 17,400 |
General and administrative [Member] | ' | ' |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ' | ' |
Stock-based compensation | $144,567 | $64,595 |
Stock_Option_Plans_Schedule_of3
Stock Option Plans (Schedule of Awards to Mr. Bologna) (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Intrinsic Value | $8,042 |
Options Exercisable | 1,004,823 |
Remaining Contractual Term | '8 years 1 month 20 days |
Thomos Bologna [Member] | Restricted Stock Units (RSUs) [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Grant Date | 21-Dec-11 |
Number of Awards | 270,000 |
Intrinsic Value | 321,300 |
Reclassification to stockholdersb equity | $0 |
Options Exercisable | 0 |
Remaining Contractual Term | '7 years 8 months 12 days |
Employee Stock Option [Member] | Thomos Bologna [Member] | Period One [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Grant Date | 21-Dec-11 |
Number of Awards | 600,000 |
Intrinsic Value | 0 |
Reclassification to stockholdersb equity | $1.20 |
Options Exercisable | 400,000 |
Remaining Contractual Term | '7 years 8 months 12 days |
Employee Stock Option [Member] | Thomos Bologna [Member] | Period Two [Member] | ' |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ' |
Grant Date | 21-Dec-11 |
Number of Awards | 300,000 |
Intrinsic Value | $0 |
Reclassification to stockholdersb equity | $1.20 |
Options Exercisable | 300,000 |
Remaining Contractual Term | '7 years 8 months 12 days |
Segment_Information_Details
Segment Information (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Segment Reporting Information [Line Items] | ' | ' | ' |
Net revenue | $3,894,934 | $5,624,191 | ' |
United States [Member] | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' |
Net revenue | 3,546,903 | 4,153,172 | ' |
Long-lived assets | 2,539,481 | ' | 2,701,805 |
Europe [Member] | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' |
Net revenue | 342,601 | 1,361,249 | ' |
Japan [Member] | ' | ' | ' |
Segment Reporting Information [Line Items] | ' | ' | ' |
Net revenue | $5,430 | $109,770 | ' |
Sale_of_Common_Stock_Details
Sale of Common Stock (Details) (USD $) | 3 Months Ended | 1 Months Ended | 12 Months Ended | ||
Mar. 31, 2014 | Dec. 31, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2013 | |
Private Placement [Member] | September 2012 Private Placement [Member] | September 2012 Private Placement [Member] | |||
Class Of Stock [Line Items] | ' | ' | ' | ' | ' |
Common stock issued, price per share | ' | ' | $1.10 | ' | ' |
Net proceeds from issuance of common stock | ' | ' | $8,800,000 | ' | ' |
Registration statement filing period after closing of Private Placement | ' | ' | '45 days | ' | ' |
Registration statement effective period after closing of Private Placement | ' | ' | '180 days | ' | ' |
Common stock classified outside of stockholders equity (deficit) | $5,500,000 | $5,500,000 | $8,800,000 | ' | $5,500,000 |
Percentage of shares purchased required to be held for board observer designation right | ' | ' | 50.00% | ' | ' |
Shares of common stock reclassified to equity | 0 | ' | ' | 3,000,000 | ' |
Shares classified outside of stockholders' equity | 5,000,000 | 5,000,000 | 8,000,000 | ' | ' |
Sale_of_Common_Stock_Schedule_
Sale of Common Stock (Schedule of Common Stock Classified Outside of Stockholders' Equity) (Details) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Number of Shares | ' |
Beginning balance | 5,000,000 |
Issuance of common stock classified outside of stockholdersb equity | 0 |
Reclassification to stockholders' equity | 0 |
Ending Balance | 5,000,000 |
Amount | ' |
Beginning balance | $5,500,000 |
Issuance of common stock classified outside of stockholdersb equity | 0 |
Reclassification to stockholders' equity | 0 |
Ending balance | $5,500,000 |
Fair_Value_Measurements_Detail
Fair Value Measurements (Details) (USD $) | Mar. 31, 2014 | Mar. 31, 2013 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Money market accounts | $0 | [1] | $10,000 | [1] |
Fair Value, Inputs, Level 1 [Member] | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Money market accounts | 0 | [1] | 10,000 | [1] |
Fair Value, Inputs, Level 2 [Member] | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Money market accounts | 0 | [1] | 0 | [1] |
Fair Value, Inputs, Level 3 [Member] | ' | ' | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ' | ' | ||
Money market accounts | $0 | [1] | $0 | [1] |
[1] | Included in cash and cash equivalents on the accompanying consolidated balance sheets. |