Liquidity

12 Months Ended

Dec. 31, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Liquidity

4. Liquidity

As of December 31, 2019, the Company had cash and cash equivalents of $2.3 million, net accounts receivable of $10.2 million, total current assets of $16.4 million and total current liabilities of $17.3 million. For the year ended December 31, 2019, the Company had a net loss of $26.7 million and cash used in operating activities was $19.0 million.

We do not expect to generate positive cash flows from operations for the year ending December 31, 2020. We intend to meet our ongoing capital needs by using our available cash, proceeds under the Securities Purchase and Exchange Agreement, additional borrowings under the Line of Credit as well as increasing our line of credit limit by an additional $4 million as a result of the additional accounts receivable acquired in July 2019 as part of our acquisition of pharma services (which requires a modification to the bank agreement and approval by SVB, as well as approval by our preferred shareholders), revenue growth and margin improvement, collecting accounts receivable, containing costs as well as exploring other financing options. Management believes that the Company has sufficient cash on hand and available to sustain operations through at least April 23, 2021. However, there is no guarantee that additional capital can be raised to fund our future operations.

In September 2019, we entered into the Equity Distribution Agreement (the “Agreement”) with Oppenheimer & Co. Inc., as sales agent (the “Agent”), pursuant to which we may, from time to time, issue and sell shares of our common stock in an aggregate offering price of up to $4.8 million through the Agent. See Note 13, Equity, for more details. As of December 31, 2019, 97,817 shares (as adjusted for the reverse stock split) of common stock were sold for net proceeds of approximately $0.2 million.

In January 2020, we sold 20,000 preferred shares to investors, led by 1315 Capital, for net proceeds of approximately $19.5 million. See Note 21, Subsequent Events, for more detail.

In November 2018, the Company entered into up to a $4.0 million secured Line of Credit facility including a 3-year term loan for $850,000 with Silicon Valley Bank (“SVB”). The proceeds of the term loan are expected to be used for laboratory capital expenditures and will be repaid monthly. The balance of the Line of Credit is available for working capital purposes as a revolving line of credit and has a three-year term. The borrowing limit of the revolving line of credit is the lower of 80% of the Company’s eligible accounts receivable (as adjusted by SVB) and the aggregate amount of cash collections with respect to accounts receivable during the three prior calendar months. Term loan outstanding amounts incur interest at a rate per annum equal to the greater of the Wall Street Journal Prime Rate (the “Prime Rate”) and 5.00%. Revolving Line outstanding amounts incur interest at a rate per annum equal to the Prime Rate plus 0.5%. As of December 31, 2019, $3.0 million was outstanding.

See Note 21, Subsequent Events, regarding the adverse impact of the COVID-19 pandemic on our results of operations, cash flows and financial condition for the first and second quarters of fiscal 2020 and possibly beyond.

During April 2020, the Company applied for various federal stimulus loans, grants and advances made available under Title 1 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, including an approximate $3.5 million loan request under the Small Business Administration (SBA) Paycheck Protection Program (PPP), an approximate $0.65 million grant from the Department of Health and Human Services (HSS), and approximately $2.1 million in advances under the Centers for Medicare & Medicaid Services (CMS) accelerated and advance payment program. Each of these loans, grants and advances require certain certifications by the Company and impose specific limitations on the use of the proceeds.

As of April 21, 2020, we received $2.1 million in advances under the CMS accelerated and advance payment program, as well as the $0.65 million HSS grant. The CMS advance will be offset against future Medicare billings of the Company, and the HSS grant is subject to certain conditions regarding its use, including developing coronavirus and serology tests. There is no guarantee that any other loans, grants or advances will be approved. As of April 21, 2020, the Company’s PPP loan has not yet been approved, pending new legislation increasing the pool. The PPP provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The PPP loans and accrued interest are forgivable after eight weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. If the Company is successful in obtaining a PPP loan, we intend to use the proceeds for purposes consistent with the PPP and expect to meet the conditions for forgiveness of the loan.

As of April 21, 2020 we have approximately $18.4 million of cash on hand. Also as of April 21, 2020, the Company has no further availability on its credit facility, but is in the process of completing an agreement with SVB to expand the credit facility from $4.0 million to $8.0 million. No assurance can be given that such an expansion agreement will be entered into.