Organization, Description of Business, Basis of Presentation and Acquisition | Organization, Description of Business, Basis of Presentation and Acquisitions We are an oncology diagnostics company focused on developing, commercializing and providing DNA-based tests and services to improve the personalization of cancer treatment and to better inform biopharmaceutical companies of genomic factors influencing subject responses to therapeutics. Our vision is to become the oncology diagnostics partner for companies and clinicians by participating in the entire care continuum from bench to bedside. We believe the diagnostic industry is undergoing a metamorphosis in its approach to oncology testing, embracing individualized medicine as a means to drive higher standards of patient treatment and disease management. Similarly, biopharmaceutical companies are increasingly engaging companies such as ours to provide information on clinical trial participants’ DNA profiles in order to identify genomic variations that may be responsible for differing responses to pharmaceuticals, and particularly to oncology drugs, thereby increasing the efficiency of trials while lowering related costs. We believe tailored therapeutics can revolutionize oncology medicine through DNA-based testing services, enabling physicians and researchers to target the factors that make each patient and disease unique. We have created a unique position in the industry by providing targeted somatic analysis of tumor sample cells alongside germline analysis of an individual’s non-cancerous cells’ DNA as we attempt to reach the next milestone in personalized medicine. We were incorporated in the State of Delaware on April 8, 1999 and have offices and state-of-the-art laboratories located in New Jersey, North Carolina, Shanghai (China), and Hyderabad (India). Our laboratories comply with the highest regulatory standards as appropriate for the services they deliver including CLIA, CAP, NY State and NABL (India).We have two advisory boards to counsel our scientific and clinical direction. Our Scientific Advisory Board is comprised of preeminent scientists and physicians from the fields of cancer biology, cancer pathology, cancer medicine and molecular genetics. Our Clinical Advisory Board is comprised of clinicians and scientists focused on clinical implementation of our proprietary tests and services and mapping those tests and services to patient needs. Our services are built on a foundation of world-class scientific knowledge and intellectual property in solid and blood-borne cancers, as well as strong academic relationships with major cancer centers such as Memorial Sloan-Kettering, Mayo Clinic, and the National Cancer Institute. Basis of Presentation The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions for interim reporting as prescribed by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2014, filed with the Securities and Exchange Commission on March 16, 2015. The consolidated balance sheet as of December 31, 2014, included herein was derived from the audited financial statements as of that date, but does not include all disclosures including notes required by GAAP. Interim financial results are not necessarily indicative of the results that may be expected for any future interim period or for the year ending December 31, 2015. In the second quarter of 2015, we adopted ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs”. Previously, debt issuance costs were recorded as assets on the balance sheet. This update requires that debt issuance costs related to a debt liability be presented on the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. This update does not change the recognition and measurement of debt issuance costs and requires retrospective adoption. We did not have debt issuance costs in the December 31, 2014 Consolidated Balance Sheet. 2014 Acquisitions On July 16, 2014, we purchased substantially all of the assets of Gentris Corporation, (“Gentris”), with its principal place of business in North Carolina, for approximately $4.8 million . There were no changes in the preliminary purchase price allocation or goodwill impairment for Gentris during the nine months ended September 30, 2015 . On August 18, 2014, we acquired BioServe Biotechnologies (India) Private Limited, an Indian corporation (“BioServe”) for an aggregate purchase price of approximately $1.1 million . During the nine months ended September 30, 2015 , there was no goodwill impairment for BioServe, and the preliminary allocation of the purchase price was retrospectively adjusted for a measurement period adjustment to increase goodwill by approximately $193,000 , reduce fixed assets by approximately $136,000 , reduce other assets by approximately $38,000 and reduce other current assets by approximately $19,000 . The fair value of the assets acquired and liabilities assumed as of August 18, 2014 are now as follows: Amount Accounts receivable $ 151,002 Other current assets 102,064 Fixed assets 488,481 Other assets 378,440 Goodwill 734,925 Current liabilities (758,614 ) Other liabilities (22,049 ) Total Purchase Price $ 1,074,249 The results of operations for the three and nine months ended September 30, 2015 include the operations of Gentris and BioServe and include combined revenues of $1,728,238 and $5,357,382 , respectively, and a combined net loss of $1,043,224 and $2,202,254 , respectively. The following table provides certain pro forma financial information for the Company as if the acquisitions of Gentris and BioServe discussed above occurred on January 1, 2014: Three Months Ended Nine Months Ended September 30, 2014 September 30, 2014 Revenue $ 3,493,345 $ 10,329,910 Net loss (6,039,858 ) (13,325,068 ) Basic net loss per share $ (0.63 ) $ (1.40 ) Diluted net loss per share (0.64 ) (1.43 ) Acquisition of Response Genetics, Inc. On October 9, 2015, we acquired substantially all the assets and assumed certain liabilities of Response Genetics, Inc. (“Response Genetics”), with its principal place of business in California, in a transaction valued at approximately $13.4 million , comprised of $7 million in cash and 788,584 shares of the Company’s common stock, with the common stock being valued at $6.4 million . Response Genetics is a life sciences company engaged in the research and development of clinical diagnostic tests for cancer. Its mission is to provide personalized genetic information that will help guide physicians and patients in choosing the treatment from which a given patient is most likely to benefit as well as providing clinical testing services for pharmaceutical companies. Response Genetics generated revenues primarily from sales of its ResponseDX® diagnostic tests, which Response Genetics launched in 2008, and by providing clinical trial testing services to pharmaceutical companies. The transaction is being accounted for using the acquisition method of accounting for business combinations in accordance with GAAP. Under this method, the total consideration transferred to consummate the acquisition is being allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the closing date of the acquisition. The acquisition method of accounting requires extensive use of estimates and judgments to allocate the consideration transferred to the identifiable tangible and intangible assets acquired and liabilities assumed. Accordingly, the allocation of the consideration transferred is preliminary and will be adjusted upon completion of the final valuation of the assets acquired and liabilities assumed. The final valuation is expected to be completed as soon as practicable but no later than 12 months after the closing date of the acquisition. The consolidated financial statements for the three and nine months ended September 30, 2015 and 2014 do not include the operations of Response Genetics. The results of operations for Response Genetics will be included in the Company’s consolidated financial statements beginning on October 9, 2015. The preliminary allocation of the purchase price of the fair value of the assets acquired and liabilities assumed as of October 9, 2015 are as follows: Amount Accounts receivable $ 350,000 Prepaid expenses and other current assets 500,000 Property and equipment 1,000,000 Intangible assets 550,000 Goodwill 11,550,000 Accrued expenses (425,000 ) Obligations under capital leases (125,000 ) Total Purchase Price $ 13,400,000 The following table provides certain pro forma financial information for the Company as if the acquisition of Response Genetics discussed above occurred on January 1, 2014: Three Months Ended September 30, Nine Months Ended September 30, 2015 2014 2015 2014 Revenue $ 6,879,587 $ 7,686,841 $ 23,043,458 $ 18,805,055 Net loss (10,353,822 ) (8,181,903 ) (27,522,585 ) (21,450,482 ) Basic net loss per share $ (0.98 ) $ (0.79 ) $ (2.62 ) $ (2.11 ) Diluted net loss per share (1.00 ) (0.80 ) (2.62 ) (2.14 ) The pro forma numbers above are derived from historical numbers of the Company and Response Genetics. Over time the operations of Response Genetics will be integrated into the operations of the Company. This integration may change how certain tests are coded and submitted to payers (including Medicare) and, consequently, may result in differences in the future in which revenues and bad debt expenses are recorded when compared with the historical methods of Response Genetics. At the current time, we do not have enough information to prepare a reliable estimate of any possible changes. |