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The accompanying condensed
consolidated financial statements have been prepared on a basis that assumes that the Company will continue as a going concern,
which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities and commitments
in the normal course of business. As of September 30, 2017, the Company had cash and cash equivalents of $11.7 million, net accounts
receivable of $2.8 million, total current assets of $15.8 million and total current liabilities of $8.3 million. For the nine months
ended September 30, 2017, the Company had a net loss of $7.2 million and cash used in operating activities was $12.9 million.
During the nine months ended
September 30, 2017, the Company closed on four equity offerings raising gross proceeds of $27.9 million. The details are as follows:
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On January 6, 2017, the Company completed a registered direct public offering (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. |
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On January 25, 2017, the Company completed a registered direct public offering (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 (the “Concurrent Warrants”), to the same investors participating in the Third Registered Direct Offering, (or the “Private Placement”). The Concurrent Warrants and the shares of its common stock issuable upon the exercise of the Concurrent 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 Concurrent 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 Concurrent Warrant. The 855,000 unregistered Concurrent Warrants also have an exercise price of $4.69 and have a five-year term. The Third Registered Direct Offering and the Private Placement together resulted in gross proceeds to the Company of approximately $4.0 million. The Company used approximately $1.0 million of the proceeds to satisfy the severance obligations due to five former senior executives. |
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On February 8, 2017, the Company completed an underwritten, confidentially marketed public offering (“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, including the over-allotment. |
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On June 21, 2017, pursuant to its S-1 filing of its preliminary prospectus to register shares on May 22, 2017, as amended thereafter, the Company completed a public offering (the “Offering”) for 9,900,000 shares of common stock together with an equal number of common warrants (the “Base Warrants”), to purchase shares of its common stock (and the shares of common stock that are issuable from time to time upon exercise of the common warrants) for $1.10 per share. Each Base Warrant upon exercise at a price of $1.25 will result in the issuance of one share of common stock to the holder. A public trading market for the Base Warrants was established on July 5, 2017 on the OTC market under the trading symbol IDGGW. As part of the Offering, which closed on June 21, 2017, the related underwriters purchased the full over-allotment of 1,875,000 Base Warrants available to them for the specified $.01 per warrant. 2,600,000 of Pre-Funded Warrants were also sold at the specified $1.09 per warrant. The combined gross proceeds of the Offering totaled $13.7 million with approximately $12.3 million of net funds available to the Company after deducting underwriting discounts and other stock issuance expenses. As of July 7, 2017 all of the 2,600,000 Pre-Funded Warrants were exercised for the $.01 per warrant exercise price and all 2,600,000 common shares related to the warrants have been issued. On July 31, the Company and the underwriters closed on the exercise of the underwriters’ over-allotment option to purchase an additional 875,000 shares of common stock at a price of $1.09 per share for gross proceeds of $0.960 million. |
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During September 2017 the Company received approximately $0.9 million from the exercise of 747,800 Base Warrants issued as part of the Offering. |
Subsequent
to September 2017 the Company received approximately $6.2 million from the exercise of Base Warrants issued as part of the
Offering, as follows:
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During October 2017 the Company received approximately $1.2 million from the exercise of approximately 925,000 Base Warrants. |
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On October 12, 2017 the Company entered into an agreement with certain holders of Base Warrants to exercise 4 million Base Warrants at the exercise price of $1.25 in exchange for 3.2 million additional private placement warrants with an exercise price of $1.80, resulting in gross proceeds to the Company of $5.0 million. The new warrants may not be exercised for six months from the issue date and expire in five and one-half years from their issuance date. |
As part of our acquisition
of RedPath Integrated Pathology, Inc., we issued a non-negotiable subordinated secured, non-interest bearing, promissory note,
dated as of October 31, 2014, with an aggregate principal amount of $10.7 million outstanding (the “RedPath Note”).
In December 2016 we repaid $1.33 million in principal of the RedPath Note resulting in an outstanding balance of $9.34 million.
The RedPath Note was subsequently acquired by a single institutional investor (the “Investor”) for $8.87 million on
March 22, 2017. Also on that date we and the Investor exchanged the RedPath Note for a senior secured convertible note in the aggregate
principal amount of $5.32 million and a senior secured non-convertible note in the aggregate principal amount of $3.55 million.
On April 18, 2017, we and the Investor exchanged the senior secured non-convertible note for $3.55 million of our senior secured
convertible note. Between March 23, 2017 and April 18, 2017, the senior secured convertible notes were converted in full for 3,795,429
shares of our common stock. We no longer have any outstanding secured debt, and any security interests and liens related to our
former secured debt have been fully settled.
The Company entered into a
Credit Agreement with SCM Specialty Finance Opportunities Fund, L.P. (the “Credit Agreement”) on September 28, 2016
for $1.2 million. The Credit Agreement contains customary representations and warranties in favor of the Lender and certain covenants,
including, among other things, financial covenants relating to loan turnover rates, liquidity and revenue targets. As of September
30, 2017 the Company is renegotiating terms of the Credit Agreement and has not borrowed any funds under the Credit Agreement.
While the Company has significantly
increased its cash balance and has eliminated its long term indebtedness, the Company does not expect to generate positive cash
flows from operations for the year ending December 31, 2017. The Company intends to meet its capital needs by revenue growth,
containing costs, entering into strategic alliances as well as exploring other options, including the possibility of raising additional
debt or equity capital as necessary. There is, however, no assurance the Company will be successful in meeting its capital requirements
prior to becoming cash flow positive.
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