Quarterly report pursuant to Section 13 or 15(d)

Liquidity

v3.7.0.1
Liquidity
 3 Months Ended
Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Liquidity
2. LIQUIDITY

 

The accompanying consolidated financial statements have been prepared on a basis that assumes that the Company will continue as a going concern and that contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As of March 31, 2017, the Company had cash and cash equivalents of $7.1 million, net accounts receivable of $2.3 million, current assets of $10.7 million and current liabilities of $13.0 million. For the quarter ended March 31, 2017, the Company had net income of $2.4 million and cash used in operating activities was $4.1 million.

 

On December 22, 2016, the Company completed a registered direct public offering, which resulted in gross proceeds to the Company of approximately $1.9 million, (net proceeds of $1.7 million after expenses) of which approximately $1.33 million was used to repay secured debt.

 

In 2017, the Company closed on three equity offerings raising gross proceeds of $12.2 million. The details are as follows:

 

  ● On January 6, 2017, the Company completed a registered direct public offering, or the Second Registered Direct Offering, to sell 630,000 shares of its common stock at a price of $6.81 per share to certain institutional investors which resulted in gross proceeds to the Company of approximately $4.2 million.
     
  ● On January 25, 2017, the Company completed a registered direct public offering, or the Third Registered Direct Offering, to sell 855,000 shares of its common stock and a concurrent private placement of warrants to purchase 855,000 shares of its common stock, or the Warrants, to the same investors participating in the Third Registered Direct Offering, or (the Private Placement). The Warrants and the shares of the Company’s common stock issuable upon the exercise of the Warrants were not registered under the Securities Act and were sold pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) of Regulation D promulgated thereunder. The shares of common stock sold in the Third Registered Direct Offering and the Warrants issued in the concurrent Private Placement were issued separately but sold together at a combined purchase price of $4.69 per share of common stock and accompanying Warrant. The Third Registered Direct Offering and the Private Placement together resulted in gross proceeds to the Company of approximately $4 million. The Company also used approximately $1.0 million to satisfy the obligations due to five former senior executives. See Note 6- Severance.

 

● On February 8, 2017, the Company completed an underwritten, confidentially marketed public offering, or the CMPO, to sell 1,200,000 shares of its common stock at a price of $3.00 per share. In addition, the Company granted the underwriters an option to purchase up to an additional 9% of the total number of shares of common stock sold by the Company in the CMPO, solely for the purpose of covering over-allotments, if any. The underwriters exercised the over-allotment option in full. The CMPO resulted in gross proceeds to the Company of approximately $3.9 million.

 

On March 23, 2017, the Company entered into an exchange agreement (the “Exchange Agreement”), with an institutional investor (the “Investor”). Prior to the Company entering into the Exchange Agreement, the Investor acquired that certain Non-Negotiable Subordinated Secured Promissory Note, dated as of October 31, 2014, as amended (the “RedPath Note”), issued by the Company and the Company’s subsidiary, Interpace, LLC, in favor of RedPath Equityholder Representative, LLC (the “RedPath Equityholder Representative”) on behalf of the former equityholders of RedPath. The RedPath Note, which was entered into in connection with the Company’s acquisition of RedPath Integrated Pathology, Inc. in October 2014, had an aggregate principal amount of $9.34 million outstanding and was acquired by the Investor for $8.87 million. The RedPath Equityholder Representative assigned all of its rights, title and interest in the RedPath Note to the Investor, including, but not limited to, its security interest in all of the assets of the Company and the assets of the Company’s subsidiaries.

 

Pursuant to the Exchange Agreement, the Company and the Investor agreed to exchange the RedPath Note for (i) a senior secured convertible note in the aggregate principal amount of $5.32 million (the “Exchanged Convertible Note”), which was convertible into shares of the Company’s common stock, in accordance with its terms, and (ii) a senior secured non-convertible note with an aggregate principal amount of $3.55 million (the “Exchanged Non-Convertible Note” and collectively, the “Exchanged Notes”), for a combined aggregate principal amount of $8.87 million.

 

As of March 30, 2017, the Investor had converted approximately 80% of the Exchanged Convertible Note to common stock, converting $4.2 million of the Exchanged Convertible Note into approximately 1.7 million shares of common stock. On April 18, 2017 the Company and the Investor agreed to exchange the Exchanged Non-Converttible Note for a new convertible note in the same principal amount of $3.55 million. The investor then converted the new convertible note into approximately 1.6 million shares of the Company’s Common Stock at $2.20 per share. As a result of the note exchanges and subsequent conversions, the RedPath note was deemed paid in full. Accordingly, the security interest has been terminated and the liens will be released upon proper termination filings.

 

The Company entered into a Credit Agreement with SCM Specialty Finance Opportunities Fund, L.P. on September 28, 2016.

 

The Credit Agreement contains customary representations and warranties in favor of the Lender and certain covenants, including, among other things, financial covenants relating to loan turnover rates, liquidity and revenue targets. As of March 31, 2017 the Company had not borrowed any funds under the Credit Agreement.

 

While the Company has made significant reductions in indebtedness, the Company is not yet cash flow positive from operations. Accordingly, due to the Company’s operating deficit and obligations the Company may require additional capital to meet its obligations. There is no guarantee that additional capital can be raised to fund operations and obligations in 2017 and beyond, if needed. The Company intends to meet its capital needs by driving revenue growth, containing costs, entering into strategic alliances as well as exploring other options, including the possibility of raising additional equity capital. These liquidity factors, among others, have raised substantial doubts about our ability to continue as a going concern.