Additional financing received

Stockholder Approval was obtained on October 10, 2019 for the Securities Purchase Agreement (discussed in Note 16, Equity) and each share of Series A-1 issued to the Investor at the initial closing automatically converted into one share of Series A on that day (the “Conversion”).

On October 16, 2019, the Company and the Investor consummated the Second Closing. At the Second Closing, the Company issued to the Investor 130 newly created shares of Series A at an aggregate gross purchase price of $13,000,000. The Company used the proceeds from the Second Closing to make the maturity date payment, subject to certain holdbacks, with respect to the promissory note issued by a subsidiary of the Company to Cancer Genetics, Inc., and expects to use the remaining proceeds for general corporate purposes, including the integration of the Biopharma services business. The Company issued the aforementioned note in connection with the acquisition of its BioPharma services business.

The Series A was offered and sold pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 of Regulation D promulgated thereunder. The shares to be issued upon conversion of the Series A have not been registered under the Securities Act and may not be offered or sold in the United States in the absence of an effective registration statement or exemption from the registration requirements.

Revolving line of credit

Using the proceeds received from the Second Closing described above, the Company paid off the line of credit balance of $3.75 million that was outstanding as of September 30, 2019 in October 2019.

Excess consideration note

As part of the purchase of the BioPharma business from CGI and the consideration given for the purchased assets, $7,692,300 was in the form of a subordinated seller note (the “Excess Consideration Note”), issued by a subsidiary of the Company to CGI. The payment of the note due in October 2019 was subject to certain adjustments to the purchase price as described in Note 2, Acquisition.

In October 2019, the excess consideration note balance was paid to CGI amounting to $6,024,489 million which included the following adjustments: an indemnification holdback of $735,000 (less paid indemnity claims) due to be released to CGI in January 2020, less the remaining accounts receivable holdback of $152,858 also due to be released by January 2020, less the final post-closing net-worth adjustment of $775,000, less repayment of certain advances made by the Company on behalf of the BioPharma business to CGI regarding certain pre-closing liabilities totaling $317,628, plus $289,000 of unbilled accounts receivable as of July 15, 2019 that were not included in the original financial schedules, plus unpaid and accrued interest under the excess consideration note of $23,674.

The indemnification and accounts receivable holdbacks were deposited into separate escrow accounts until released or settled which is due by December 31, 2019.

Nasdaq notification

On October 15, 2019, the Company received notice from Nasdaq indicating that, while the Company has not regained compliance with the minimum bid price requirement, the staff of Nasdaq (the “Staff”) has determined that the Company is eligible for an additional 180-day period, or until April 13, 2020, to regain compliance. The Staff’s determination was based on (i) the Company meeting the continued listing requirement for market value of its publicly held shares and all other applicable initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and (ii) the Company providing written notice to Nasdaq of its intent to cure the deficiency during this second compliance period by effecting a reverse stock split, if necessary. If at any time during this second, 180-day period the closing bid price of the Company’s Common Stock is at least $1.00 per share for at least a minimum of 10 consecutive business days, the Staff will provide written confirmation of compliance. If compliance cannot be demonstrated by April 13, 2020, Nasdaq will provide written notification to the Company that its Common Stock will be subject to delisting. At that time, the Company may appeal the delisting determination to a Nasdaq hearings panel. There can be no assurance that the Company will regain compliance with the Rule or maintain compliance with other Nasdaq continued listing requirements.

Reverse Stock Split

On November 14, 2019, the Company filed a definitive proxy statement on Schedule 14A for a special meeting of stockholders to be held on December 13, 2019 to approve an amendment to the Company’s certificate of incorporation to effect a reverse stock split of common stock, at a ratio in the range from one-for-five to one-for-fifteen, with such specific ratio to be determined by the Company’s board of directors following the special meeting. The Company is not obligated to effect the reverse stock split.