Accounting Policies, by Policy (Policies) | 12 Months Ended |
Dec. 31, 2014 |
Accounting Policies [Abstract] | |
Use of Estimates, Policy [Policy Text Block] | Use of Estimates |
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The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Significant estimates in the consolidated financial statements have been made for revenue, depreciation of property and equipment and stock-based compensation. Actual results could differ materially from those estimates. |
Cash and Cash Equivalents, Policy [Policy Text Block] | Cash |
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The Company considers all highly liquid investments with a maturity at date of purchase of three months or less to be cash equivalents. Cash is currently comprised only of cash on hand and deposits in banks. At December 31, 2014 and 2013, the Company had $50,000 in a restricted money market account that was held as cash collateral against an outstanding letter of credit for security on a lease. |
Receivables, Trade and Other Accounts Receivable, Allowance for Doubtful Accounts, Policy [Policy Text Block] | Accounts Receivable and Allowance for Doubtful Accounts |
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Accounts receivable are recorded net of an allowance for doubtful accounts. The Company estimates an allowance for doubtful accounts based on the aging of the accounts receivable and the historical collection experience since its inception for each type of payor. Account balances are charged-off against the allowance when it is probable the receivable will not be recovered. |
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During the year ended December 31, 2014, the Company discovered that $78,000 of insurance reimbursements were sent directly to patients, in error, and identified $99,000 of older Medicare and contracted insurance claims that were past the due date requirements. When the amounts were determined to be uncollectible, they were expensed as bad debt and subsequently charged off against the allowance. Therefore, there were no allowances for doubtful accounts recorded as of December 31, 2014 or 2013. |
Inventory, Policy [Policy Text Block] | Inventory |
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Inventory, which consists entirely of raw materials, and includes laboratory materials and supplies, is valued at the lower of cost or market using the first-in, first-out (“FIFO”) method. |
Property, Plant and Equipment, Policy [Policy Text Block] | Property and Equipment |
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Property and equipment is carried at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets, which range from three to ten years. Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations. |
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block] | Long Lived Assets |
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Long-lived assets, consisting of property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable based on undiscounted cash flows. If long-lived assets are impaired, an impairment loss is recognized and is measured as the amount by which the carrying value exceeds the estimated fair value of the assets. No impairment charges were recorded during the years ended December 31, 2014 or 2013. |
Deferred Charges, Policy [Policy Text Block] | Deferred Offering Costs |
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During the years ended December 31, 2014 and 2013, the Company incurred $47,000 and $655,000, respectively, in direct costs related to its anticipated public offerings of common stock. These costs were deferred and recorded as a long-term asset at December 31, 2014 and 2013 and reclassified as a reduction to additional paid-in capital upon completion of the respective offerings in 2015 and 2014, respectively. |
Lease, Policy [Policy Text Block] | Deferred Rent |
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Where rent abatements are made available to the Company under the terms of a lease agreement, the abatements are accounted for as a reduction of rent expense over the life of the lease and rent expense is recognized on a straight-line basis over the entire term of the lease. The cumulative difference between actual rent payments and recognized rental expense is recorded as deferred rent in the consolidated balance sheets. |
Revenue Recognition, Policy [Policy Text Block] | Revenue Recognition |
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Revenues that are derived from testing services are recognized in accordance with revenue recognition accounting guidance, 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. |
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Revenues are recorded on an accrual basis when the contractual obligations are completed as assays are processed through the Company’s laboratory and test results are delivered to ordering physicians. Revenues are billed to various payors, including Medicare, contracted insurance companies, directly billed customers (UAMS, pharmaceutical companies, reference laboratories and hospitals) and non-contracted insurance companies. Revenues from Medicare, contracted insurance companies and directly billed customers are reported based on the contractual rate. The contractual rate is based on established agreed upon rates between the Company and the respective payor. Directly billed customers are invoiced the contractual rate by the Company. Revenues from non-contracted insurance companies are reported based on the amount expected to be collected, which is based on the historical collection experience of each payor or payor group, as appropriate. The difference between the amount billed and the amount estimated to be collected from non-contracted insurance companies is recorded as a contractual allowance at the same time the revenue is recognized, to arrive at reported net revenue. The difference between the amounts billed and the contractual rates from Medicare and contracted insurance companies are recorded as contractual allowances at the same time the revenue is recognized, to arrive at reported net revenue. The Company does not record revenue from individuals for billings until cash is collected; as collectability is not assured at the time services are provided, therefore there are no accounts receivable from self-payors. Gross revenues from individuals have been immaterial to date. |
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The Company’s estimates of net revenue for non-contracted insurance companies are subject to change based on the contractual status and payment policies of the third-party payors with whom the Company deals. The Company regularly refines its estimates in order to make estimated revenue as accurate as possible based on its most recent collection experience with each third-party payor. The Company regularly reviews its historical collection experience for non-contracted payors and adjusts expected revenues for current and subsequent periods accordingly. During the year ended December 31, 2014, net unfavorable changes in estimates were recorded to revenue related to non-contracted revenues recorded in prior years of $380,000, of which $106,000 and $274,000 related to revenues previously recorded during 2012 and 2013, respectively. During the year ended December 31, 2013, net unfavorable changes in estimates were recorded to revenue related to non-contracted revenues recorded in the prior year of $57,000. |
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The table below shows the adjustments made to gross revenues to arrive at net revenues, the amount reported in the consolidated statements of operations: |
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| | Years Ended December 31, | |
(in thousands) | | 2014 | | | 2013 | |
Gross revenues | | $ | 6,484 | | | $ | 5,491 | |
Less: contractual allowance | | | (2,164 | ) | | | (1,175 | ) |
Net revenue | | $ | 4,320 | | | $ | 4,316 | |
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Contractual allowances recorded during the years ended December 31, 2014 and 2013 represented 33% and 21% of gross revenues, respectively. The increase in contractual allowances is primarily due to net unfavorable changes in estimates of $541,000 recorded during the year ended December 31, 2014 related to current and prior years’ revenue. |
Cost of Sales, Policy [Policy Text Block] | Cost of Revenue |
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Cost of revenue represents the cost of materials, personnel costs, costs associated with processing specimens including pathological review, quality control analyses, and delivery charges necessary to render an individualized test result, depreciation, amortization and royalty expense. Costs associated with performing tests are recorded as the tests are processed. |
License Fees Policy [Policy Text Block] | Royalties |
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The Company licenses technology for patents for uses of a gene expression profiling (“GEP”) assay called MyPRS® and its related technology. Under the terms of the license agreement, the Company is required to pay royalties to UAMS. The royalties are calculated as a fixed percentage of the net revenue received from third parties that the Company generates from using this technology. The Company accrues for such royalties when incurred, which is based on when revenue is collected. Such royalties are included in cost of revenue in the accompanying consolidated statements of operations. |
Research and Development Expense, Policy [Policy Text Block] | Research and Development |
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Costs associated with research and development activities are expensed as incurred. Research and development costs primarily include personnel costs, laboratory supplies, reagents and consulting costs. To date, the Company has not included an allocation of any indirect costs in research and development. |
Income Tax, Policy [Policy Text Block] | Income Taxes |
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Prior to the Corporate Conversion, the Company was a limited liability company, which is not a tax paying entity at the corporate level. Each member was instead individually responsible for such member’s share of the Company’s income or loss for income tax reporting purposes. Net operating losses incurred by the Company through the date of the Corporate Conversion have been, or will be, used by the members to offset gains on other interests and are, therefore, not able to be carried forward to the Company. |
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Effective as of the Corporate Conversion, deferred tax assets and liabilities are recorded for the expected future tax consequences of events that have been included in the consolidated financial statements or income tax returns. Deferred taxes are determined on the basis of the differences between the carrying amount of assets and liabilities for financial statement and income tax purposes at enacted rates in effect for the years in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized. |
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Applicable accounting guidance requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. Accounting provisions also require that a change in judgment that results in subsequent recognition, derecognition, or change in a measurement of a tax position taken in a prior annual period (including any related interest and penalties) be recognized as a discrete item in the period in which the change occurs. The Company regularly evaluates the likelihood of recognizing the benefit for income tax positions taken in various federal and state filings by considering all relevant facts, circumstances, and information available. |
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Any interest and penalties related to unrecognized tax benefits are classified as a component of income tax expense. |
Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] | Stock-Based Compensation |
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Compensation expense for all stock-based payments made to employees, directors, and consultants are measured and recognized based on estimated fair value, net of an estimated forfeiture rate. These stock-based awards include stock options and restricted stock units. The Company estimates the fair value of stock options granted using the Black-Scholes-Merton (“BSM”), option-pricing model, which requires the use of estimates such as stock price volatility and expected option lives, as well as expected option forfeiture rates. The fair value of stock options granted to employees is estimated at the date of grant, while the fair value of stock options granted to non-employees is estimated at the date of grant using the BSM pricing model and remeasured at each subsequent reporting date to fair value until performance is complete, with changes in fair value recognized as expense in the statement of operations and comprehensive loss. |
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The fair value of restricted stock units issued to employees is based on the market price of the Company’s common stock on the date of grant and, for nonemployees, at the date when performance is complete. Upon settlement of all or a portion of the award in cash, the recognized fair value of the corresponding amount of awards is reversed from additional paid-in capital and the excess of the cash payment over this amount is recognized as additional stock-based compensation expense. |
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Stock-based compensation cost is recognized on a straight-line basis over the requisite service period of the award. Stock-based compensation expense is recognized only for those awards that are ultimately expected to vest. The Company estimates forfeitures at the time of grant and revises the estimate, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Changes in forfeiture estimates impact compensation cost in the period in which the change in estimate occurs. |
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Due to the Company’s net loss position, no tax benefits for stock-based compensation have been recognized in the statements of cash flows. The Company has not recognized, and does not expect to recognize in the near future, any tax benefit related to stock-based compensation cost as a result of its full valuation allowance on net deferred tax assets and net operating loss carryforwards. |
Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair Value of Financial Instruments |
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The Company’s financial instruments consist principally of cash, restricted cash, accounts receivable, accounts payable, amounts due to related party and notes payable. |
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The carrying amounts of financial instruments such as accounts receivable and accounts payable approximate their relative fair values due to the short-term maturities of these instruments. |
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Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Accounting guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: |
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Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
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Level 2—Includes other inputs that are directly or indirectly observable in the marketplace. |
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Level 3—Unobservable inputs that are supported by little or no market activities, therefore requiring an entity to develop its own assumptions. |
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At December 31, 2014 and 2013, the fair value of the Company’s remaining lease liability on its vacated facility was measured using estimated net cash flows, discounted using a nominal risk-free rate, which are considered Level 3 inputs. The present value of the remaining lease liability at December 31, 2014 and 2013 was $248,000 and $578,000, respectively. |
Earnings Per Share, Policy [Policy Text Block] | Net Loss Per Share |
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Basic and diluted net loss per common share for the periods presented is computed by dividing net loss by the weighted-average number of common shares outstanding during the respective periods, without consideration of common stock equivalents. Basic and diluted net loss per common share includes vested, but unissued restricted stock units from the date of vesting. |
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For all periods presented, the number of shares outstanding has been adjusted to reflect the Corporate Conversion completed on June 17, 2014 as if it had occurred as of the beginning of the respective periods presented. |
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Common stock equivalents that could potentially reduce net income per common share in the future that were not included in the determination of diluted loss per common share as their effects were antidilutive are as follows: |
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| | December 31, | | | | | |
2014 | | | | |
Unvested restricted stock units | | | 655,200 | | | | | |
Options to purchase common stock | | | 152,000 | | | | | |
Warrants to purchase common stock | | | 42,500 | | | | | |
Total | | | 849,700 | | | | | |
Concentration Risk, Credit Risk, Policy [Policy Text Block] | Concentration of Credit Risk, Major Customers and Suppliers |
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Cash is maintained at two financial institutions and, at times, balances may exceed federally insured limits. The Company has not experienced any losses related to these balances. |
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During the years ended December 31, 2014 and 2013, the Company had one major customer, UAMS. Revenue sourced either from or through UAMS accounted for 84% and 83% of net revenue during the years ended December 31, 2014 and 2013, respectively. Accounts receivable sourced either from or through UAMS at December 31, 2014 and 2013 accounted for 63% and 62% of total accounts receivable outstanding, respectively. |
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Inventory used in the Company’s testing process is procured from one supplier. Any supply interruption or an increase in demand beyond such supplier’s capabilities could have an adverse impact on the Company’s business. Management believes it could identify alternative suppliers, if necessary, but it is possible such suppliers may not be identified in a timely manner to avoid an adverse impact on the Company’s business. |
Reclassification, Policy [Policy Text Block] | Reclassifications |
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Reclassifications of certain current liabilities in the consolidated balance sheet and operating expenses in the consolidated statement of operations have been made as of and during the year ended December 31, 2013 to conform to the 2014 presentation. |
New Accounting Pronouncements, Policy [Policy Text Block] | Recent Accounting Pronouncements |
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In February 2015, the Financial Accounting Standards Board ("FASB") issued amendments to Accounting Standards Update (“ASU”) 2015-02, Consolidation: Amendments to the Consolidation Analysis. This standard simplifies consolidation accounting by reducing the number of consolidation models and changing various aspects of current GAAP, including certain consolidation criteria for variable interest entities. This standard becomes effective for the Company’s first quarter beginning January 1, 2016 with early adoption permitted. Upon adoption, the Company may elect prospective or retrospective application. The Company is currently assessing the impact that this standard will have on its consolidated financial statements. |
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In January 2015, the FASB issued ASU 2015-01, Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items. Under this standard, an entity will no longer be allowed to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is unusual in nature and occurs infrequently. This standard becomes effective for the Company’s first quarter beginning January 1, 2016 with early adoption permitted. Upon adoption, the Company may elect prospective or retrospective application. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements. |
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In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for entities to use in accounting for revenue from contracts with customers and supersedes most current revenue recognition guidance in FASB ASC 605, Revenue Recognition, including industry-specific guidance. This standard is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard also requires additional disclosure about the nature, amount, timing and uncertainty of assets recognized from costs incurred to fulfill a contract and becomes effective for the Company’s annual reporting period beginning January 1, 2017, including interim periods within that reporting period; early adoption is not permitted. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. The Company is currently assessing the impact that this standard will have on its consolidated financial statements. |
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In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements — Going Concern, which provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and the related footnote disclosure. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financials are issued. When management identifies conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, this standard also outlines disclosures that are required in the company’s footnotes based on whether or not there are any plans intended to mitigate the relevant conditions or events to alleviate the substantial doubt. This standard becomes effective for the Company’s annual reporting period beginning January 1, 2017, and for any annual and interim periods thereafter. Early application is permitted. The Company is currently assessing the impact that this standard will have on its consolidated financial statements. |
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Future Accounting Pronouncements |
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Section 107 of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) provides that an emerging growth company, such as the Company, may take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company may delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Although, to date, the Company has not taken advantage of this delay, the Company has elected to avail itself of the extended transition period for adopting new or revised accounting standards in the future. As a result of this election, the Company’s consolidated financial statements may not be comparable to companies that comply with public company effective dates. |