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Operating Matters and Liquidity
3 Months Ended
Mar. 31, 2012
Operating Matters and Liquidity

Note 2—Operating Matters and Liquidity

 

The Company has experienced net operating losses since its inception through March 31, 2012, including a net loss of $1.4 million for the three months then ended, contributing to an accumulated deficit of $104 million as of March 31, 2012. The Company has borrowings of $13.0 million at March 31, 2012. On April 13, 2012 the Company borrowed the remaining $1.3 million of available funds under its line of credit with Pyxis Innovations Inc., an affiliate of Alticor (“Pyxis”). The total $14.3 million outstanding under the line of credit becomes due on June 30, 2012.

 

The Company was successful in 2010 and 2011 in reducing costs and continues to explore additional ways to reduce operating costs, including manufacturing costs as well as general and administrative expenses however, the opportunities to do so are very limited. Cost savings were achieved through process improvements in manufacturing, reductions in personnel and the subleasing of underutilized rental space. Management believes that the current laboratory space is adequate to process high volumes of genetic tests.

 

The Company’s financial statements have been prepared assuming that it will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company expects to incur additional losses in 2012 and, accordingly, is dependent on finding additional sources of liquidity to fund its operations. Management’s plans include identifying sources of debt and/or equity financing, extending the due date of its existing debt, growing its sources of revenue and further reducing expenditures. However, no assurance can be given at this time as to whether management will be able to achieve these plans. If the Company is not successful in raising additional debt or equity funding, extending the due date of its existing debt, completing negotiations with commercial distribution partners or reducing expenditures, it will not be able to fund operations beyond June 30, 2012. The financial statements do not include any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

 

In its report on our financial statements included in the Form 10-K for the year ended December 31, 2011, our registered independent public accounting firm, Grant Thornton LLP, included an explanatory paragraph in their report indicating that there was substantial doubt concerning the Company’s ability to continue as a going concern.

 

The ability of the Company to realize the carrying value of its fixed assets and intangible assets is especially dependent on management’s ability to successfully execute on its plan. As noted above, the Company needs to generate additional funds in order to meet its financial obligations beyond June 30, 2012. If it is unsuccessful in doing so, the Company may not be able to realize the carrying value of its fixed assets and intangible assets.