0001193125-15-378514.txt : 20151116 0001193125-15-378514.hdr.sgml : 20151116 20151116165036 ACCESSION NUMBER: 0001193125-15-378514 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 20150930 FILED AS OF DATE: 20151116 DATE AS OF CHANGE: 20151116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BG Medicine, Inc. CENTRAL INDEX KEY: 0001407038 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 043506204 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-33827 FILM NUMBER: 151235875 BUSINESS ADDRESS: STREET 1: 880 WINTER STREET STREET 2: SUITE 210 CITY: WALTHAM STATE: MA ZIP: 02451 BUSINESS PHONE: 781-890-1199 MAIL ADDRESS: STREET 1: 880 WINTER STREET STREET 2: SUITE 210 CITY: WALTHAM STATE: MA ZIP: 02451 10-Q 1 d14311d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-33827

 

 

BG MEDICINE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   04-3506204

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

303 Wyman Street, Suite 300

Waltham, Massachusetts

  02451
(Address of principal executive offices)   (Zip Code)

(781) 890-1199

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of October 31, 2015, the registrant had 11,126,579 shares of common stock outstanding.

 

 

 


Table of Contents

BG Medicine, Inc.

Index to Form 10-Q

 

             Page  
PART I: FINANCIAL INFORMATION   
  Item 1.  

Financial Statements

  
   

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014

     3   
   

Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Month Periods Ended September 30, 2015 and 2014

     4   
   

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Month Periods Ended September  30, 2015 and 2014

     5   
   

Notes to Unaudited Condensed Consolidated Financial Statements

     6   
  Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     13   
  Item 3.  

Quantitative and Qualitative Disclosures About Market Risk

     26   
  Item 4.  

Controls and Procedures

     27   
PART II: OTHER INFORMATION   
  Item 1.  

Legal Proceedings

     27   
  Item 1A.  

Risk Factors

     27   
  Item 2.  

Unregistered Sales of Equity Securities and Use of Proceeds

     28   
  Item 3.  

Defaults Upon Senior Securities

     29   
  Item 4.  

Mine Safety Disclosures

     29   
  Item 5.  

Other Information

     29   
  Item 6.  

Exhibits

     30   

 

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PART I: FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

BG Medicine, Inc. and Subsidiary

 

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

     September 30, 2015     December 31, 2014  
     (in thousands, except share and per share data)  

Assets

    

Current assets

    

Cash

   $ 2,642      $ 4,123   

Accounts receivable (net of allowances for doubtful accounts of $151 and $0, as of September 30, 2015 and December 31, 2014, respectively)

     152        174   

Inventory

     223        400   

Prepaid expenses and other current assets

     139        154   
  

 

 

   

 

 

 

Total current assets

     3,156        4,851   

Property and equipment, net

     14        117   

Intangible assets, net

     92        135   

Deposits and other assets

     94        126   
  

 

 

   

 

 

 

Total assets

   $ 3,356      $ 5,229   
  

 

 

   

 

 

 

Liabilities and Stockholders’ (Deficit) Equity

    

Current liabilities

    

Term loan

     —         2,960   

Accounts payable

     1,332        695   

Accrued expenses

     562        906   

Other current liabilities

     48        18   
  

 

 

   

 

 

 

Total current liabilities

     1,942        4,579   

Other liabilities

     94        93   
  

 

 

   

 

 

 

Total liabilities

     2,036        4,672   
  

 

 

   

 

 

 

Commitments and contingencies (Note 5)

    

Convertible preferred stock; $.001 par value; 5,000,000 and 0 shares authorized at September 30, 2015 and December 31, 2014, respectively; 1,474,443 and 0 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively; liquidation preference of $2,548 at September 30, 2015

     2,594        —    

Stockholders’ (deficit) equity

    

Common stock; $.001 par value; 100,000,000 shares authorized at September 30, 2015 and December 31, 2014; 11,126,579 and 8,632,810 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively

     11        9   

Additional paid-in capital

     164,118        161,550   

Accumulated deficit

     (165,403     (161,002
  

 

 

   

 

 

 

Total stockholders’ (deficit) equity

     (1,274     557   
  

 

 

   

 

 

 

Total liabilities and stockholders’ (deficit) equity

   $ 3,356      $ 5,229   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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BG Medicine, Inc. and Subsidiary

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2015     2014     2015     2014  
     (in thousands, except share and per share data)  

Revenues:

        

Product revenues

   $ 274      $ 669      $ 1,160      $ 2,158   

Product fee revenues

     60        26        116        75   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     334        695        1,276        2,233   
  

 

 

   

 

 

   

 

 

   

 

 

 

Costs and operating expenses:

        

Product and product fee costs

     103        234        423        764   

Research and development

     333        724        1,314        1,855   

Selling and marketing

     4        647        289        2,069   

General and administrative

     920        1,323        2,978        3,696   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and operating expenses

     1,360        2,928        5,004        8,384   
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (1,026     (2,233     (3,728     (6,151

Interest income

     —         —         —         2   

Interest expense

     (4     (165     (159     (597

Other income (loss)

     7        1        (514     2   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (1,023   $ (2,397   $ (4,401   $ (6,744

Preferred stock dividend

     (41     —         (41     —    

Deemed dividend on beneficial conversion feature

     (1,507     —          (1,507     —     

Accretion of convertible preferred stock to liquidation value

     (56     —          (56     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to common shareholders

   $ (2,627   $ (2,397   $ (6,005   $ (6,744
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share attributable to common shareholders - basic and diluted

   $ (0.27   $ (0.28   $ (0.66   $ (0.84
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average common shares outstanding used in computing per share amounts - basic and diluted

     9,862,802        8,604,312        9,057,960        8,028,373   
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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BG Medicine, Inc. and Subsidiary

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     Nine Months Ended September 30,  
     2015     2014  
     (in thousands)  

Cash flows from operating activities

    

Net loss

   $ (4,401   $ (6,744

Adjustments to reconcile net loss to net cash used in operating activities

    

Depreciation and amortization

     69        100   

Stock-based compensation

     630        489   

Non-cash interest expense

     79        164   

Provision for doubtful accounts

     151        —    

Loss on fair value of secured convertible note

     487        —     

Loss on sale of property and equipment

     64        —     

Changes in operating assets and liabilities

    

Accounts receivable

     (130     65   

Inventory

     177        101   

Prepaid expenses and other assets

     7        78   

Accounts payable, accrued expenses and other liabilities

     254        (1,349

Deferred revenue and customer deposits

     63        (1
  

 

 

   

 

 

 

Net cash flows used in operating activities

     (2,550     (7,097
  

 

 

   

 

 

 

Cash flows from investing activities

    

Proceeds from the sale of property and equipment

     13        —     
  

 

 

   

 

 

 

Net cash flows provided by investing activities

     13        —     
  

 

 

   

 

 

 

Cash flows from financing activities

    

Proceeds from public offering

     2,500        9,238   

Costs related to public offering

     (504     (243

Payments on term loan

     (2,984     (3,360

Proceeds from ESPP purchases

     —          2   

Proceeds from the exercise of stock options

     —          22   

Proceeds from secured convertible note

     500        —     

Proceeds from issuance of preferred stock

     2,000        —     

Costs related to issuance of preferred stock

     (456     —     
  

 

 

   

 

 

 

Net cash flows provided by financing activities

     1,056        5,659   
  

 

 

   

 

 

 

Net decrease in cash

     (1,481     (1,438

Cash, beginning of period

     4,123        7,751   
  

 

 

   

 

 

 

Cash, end of period

   $ 2,642      $ 6,313   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information

    

Cash paid for interest

   $ 81      $ 433   

Supplemental schedule of non-cash financing activities

    

Conversion of convertible notes payable to preferred stock

   $ 987      $ —     

Conversion of interest to preferred stock

   $ 7      $ —     

Deemed dividend on beneficial conversion feature

   $ 1,507      $ —     

Accretion of convertible preferred stock to liquidation value

   $ 56      $ —     

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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BG Medicine, Inc. and Subsidiary

 

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1. Description of Business and Basis of Presentation

Description of Business

BG Medicine, Inc. (“BG Medicine” or the “Company”) is a commercial stage company that is focused on the development and delivery of diagnostic solutions to aid in the clinical management of heart failure and related disorders.

The Company’s BGM Galectin-3® Test is an in vitro diagnostic device that employs a manual micro-titer platform to quantitatively measure galectin-3 levels in blood plasma or serum for use as an aid in assessing the prognosis of chronic heart failure in conjunction with clinical evaluation. The BGM Galectin-3® Test is cleared by the U.S. Food and Drug Administration (the “FDA”), is CE-marked and is currently available as a blood test in the United States and the European Union (“EU”).

The Company has entered into licensing agreements with leading diagnostic instrument manufacturers to develop and commercialize galectin-3 assays that will be performed on automated platforms that have been incorporated into routine practice in laboratories throughout the world. On December 23, 2014, the FDA granted 510(k) clearance for the ARCHITECT ® Galectin-3 assay, the first FDA cleared automated blood test for Galectin-3, as an aid in assessing the prognosis of patients diagnosed with chronic heart failure in conjunction with clinical evaluation. On July 6, 2015, the Company announced that the ARCHITECT ® Galectin-3 assay is now available in the United States. This is the first automated test for galectin-3 to be introduced for commercial use in the United States. The ARCHITECT ® Galectin-3 assay is performed using the Abbott ARCHITECT ® automated immunoassay analyzer and is being commercialized through an agreement between the Company and Abbott.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. The interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position at September 30, 2015 and results of operations and cash flows for the interim periods ended September 30, 2015 and 2014.

On July 8, 2015, the Company effected a 1-for-4 reverse stock split of its common stock. All previously reported common stock share amounts in the accompanying financial statements and related notes have been retroactively adjusted to reflect the reverse stock split. As a result of the reverse stock split, the stated capital on the Company’s balance sheet attributable to its common stock, which consists of the par value per share of its common stock multiplied by the aggregate number of shares of its common stock issued and outstanding, has been reduced in proportion to the size of the reverse stock split. Correspondingly, the Company’s additional paid-in capital account, which consists of the difference between its stated capital and the aggregate amount paid to the Company upon issuance of all currently outstanding shares of its common stock, has been credited with the amount by which the stated capital is reduced.

The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates and to identify matters that require additional disclosure. Subsequent events have been evaluated through the date of issuance of these financial statements. The results for the nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015 or for any other interim period or for any other future year. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

At September 30, 2015, the Company had cash totaling $2.6 million, an outstanding balance of $0 under its secured term loan facility, which the Company repaid and which was terminated in July 2015, and stockholders’ deficit of $1.3 million. During the nine months ended September 30, 2015, the Company incurred a net loss of $4.4 million, used $2.6 million of cash in operating activities and used $3.0 million of cash for payments to extinguish the term loan facility. The Company expects to continue to incur losses and use cash in operating activities for the foreseeable future.

The Company is in the early stages of commercializing its BGM Galectin-3 Test and assisting with the commercialization of the ARCHITECT® Galectin-3 assay. Interest in the testing for galectin-3 is increasing as a result of the Company’s market development activities, although it has not yet translated into significant revenue. In order to achieve profitability, the Company will need to generate significant product revenues.

 

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Effective January 1, 2014, the payment rate at which testing for galectin-3 is reimbursed by the Centers for Medicare and Medicaid Services (“CMS”), was increased to $30.01 from $17.80 per test. In 2015, the national limitation amount for testing for galectin-3 was reduced to $29.93 and applies across the U.S., except in Ohio and West Virginia where rates of $23.93 and $26.33, respectively, apply.

Since September 11, 2014, the Company has implemented a reduction of approximately 77% of its workforce, or 17 people (the “Restructuring”), leaving 5 employees. The Company took this step in order to reduce its operating expenses and extend its cash runway in anticipation of the commercial launch of automated versions of the Company’s galectin-3 test. The automated galectin-3 tests are being developed and commercialized by the Company’s diagnostic instrument manufacturing partners and will be performed on the partners’ automated platforms.

The Restructuring primarily eliminated the Company’s sales and marketing organization and removed certain positions in other functional areas, while preserving some senior management and other critical roles to support the clinical and commercial adoption of galectin-3 testing by providing support to the marketing and selling efforts of its automated partners, clinical research studies that have incorporated galectin-3 testing and by expanding the BGM Galectin-3 Test’s labeling indications for use through additional clinical studies and clearances by the FDA.

Employees affected by the Restructuring were provided with severance arrangements including outplacement assistance. As a result of the Restructuring, the Company has recorded total charges with respect to severance payments and benefits continuation of approximately $404,000 and $98,000 during 2014 and 2015, respectively. Of the total $404,000 charges in 2014, $128,000 was recorded in research and development, $114,000 was recorded in sales and marketing, and $162,000 was recorded in general and administrative expense. Of the $98,000 charges in 2015, $41,000 was recorded in research and development and $57,000 was recorded in sales and marketing expense. The Company paid approximately $277,000 of such expenses during the third and fourth quarters of 2014 and $225,000 during the first three quarters of 2015. As a result of the Restructuring, the Company estimates it will generate annualized expense savings of approximately $2.4 million primarily from savings in employee salaries and benefits.

In May 2015, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Company’s principal stockholders, Pursuant to the terms and subject to the conditions contained in the Purchase Agreement, the Company issued and sold to the purchasers (the “Purchasers”) secured convertible promissory notes in an aggregate principal amount of $500,000. In addition and pursuant to the terms of the Purchase Agreement, and as approved by the Company’s stockholders at the Company’s 2015 annual meeting of stockholders (the “2015 Annual Meeting”) and the satisfaction or waiver of other closing conditions, the Company issued and sold to the purchasers $2,000,000 of shares of newly created Series A Preferred Stock, $0.001 par value per share of the Company at the second closing that was held on July 14, 2015 following the Company’s 2015 Annual Meeting.

In June 2015, the Company entered into a sublease agreement with a third party for the 880 Winter Street office space. The term of the sublease is from June 1, 2015 through December 31, 2018 covering the balance of the underlying lease term. The Company has recorded in operating costs total charges of $153,000 with respect to the net present value of the net costs that will continue to be incurred under the lease for its remaining term and the real estate brokerage commissions on the sublease. The Company has obtained office space on a short term rental basis and expects to generate annualized savings of approximately $240,000.

As further described in Note 4, the Company had a term loan facility that was secured by substantially all of the Company’s assets. On July 14, 2015 the Company paid off all of its outstanding obligations under the term loan.

In August 2015, the Company closed on an underwritten public offering of (i) 2,315,654 Series A units, each consisting of one share of common stock and one half of a warrant to purchase one share of common stock, at a purchase price of $1.00 per Series A unit, and (ii) 184,346 Series B units, in lieu of Series A units, at a purchase price of $1.00 per Series B unit to those purchasers whose purchase of additional Series A units in the offering would result in the purchaser beneficially owning more than 9.99% of the Company’s outstanding common stock following the completion of the offering. Each Series B unit consists of one fully pre-funded warrant to purchase one share of common stock and one half of a warrant to purchase one share of common stock. The warrants (other than the fully pre-funded warrants) have an exercise price of $1.00 per share. The net offering proceeds received by the Company, after deducting discounts and commissions and expenses incurred with the offering were approximately $2.0 million.

The Company’s common stock had been listed for trading on The NASDAQ Capital Market until September 15, 2015, when it was suspended for failure to comply with The NASDAQ Capital Market continued listing standards. On September 16, 2015, the Company’s common stock began trading on the OTC Markets’ OTCQB market tier under the trading symbol “BGMD.” The

 

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delisting of the Company’s common stock from The NASDAQ Capital Market could substantially further reduce the liquidity of the Company’s common stock and result in a corresponding material reduction in the price of the Company’s common stock. In addition, the delisting could negatively affect the Company by reducing the number of investors willing to hold or acquire the Company’s common stock, which could negatively affect the Company’s ability to raise capital, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities.

The Company believes that its existing cash will be sufficient to fund its operations into July 2016. For the foreseeable future and until the Company generates significant product revenues to reach cash breakeven, the Company will need to raise additional funds to finance its operations beyond July 2016. The Company may not be able to obtain adequate financing to do so when necessary, and the terms of any financings may not be advantageous to the Company and any financings may result in dilution to the Company’s stockholders.

The above circumstances along with the Company’s history, the near term forecast of incurring net losses and negative operating cash flows, the Company’s dependence on near-term revenues generated from product fees due from a single automated partner, the Company’s limited experience with the amount and timing of sales made by its automated partners and its inability to predict the timing of the market introduction of automated tests and product fees generated by the sale of automated tests by its other automated partners raise substantial doubt regarding the Company’s ability to continue as a going concern for a reasonable period of time. The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability to continue as a going concern.

 

2. Significant Accounting Policies

Product Revenues

Product revenues are recognized when the following criteria have been met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred and risk of loss has passed; (iii) the seller’s price to the buyer is fixed or determinable; and (iv) collectability is reasonably assured.

The Company sells its products through supply agreements with laboratory testing services and diagnostic testing distributors and directly to hospitals and clinics. The Company recognizes revenue when products are received by customers, at which time both title and risk of loss have passed to the customers. The Company negotiates credit terms on a customer-by-customer basis and products are shipped at an agreed-upon price.

Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. Freight costs billed to customers are recorded as revenue.

In the past the Company did not provide an allowance for doubtful accounts or a reserve for sales returns as the Company has not experienced any credit losses, and returns are only allowed for defects in workmanship. On June 7, 2015, Health Diagnostic Laboratory, Inc. (“HDL”), which is the Company’s largest customer of its BGM Galectin-3 ® Test, filed a voluntary petition for bankruptcy protection under Chapter 11 in the United States Bankruptcy Court for the Eastern District of Virginia, Richmond Division. In light of this filing the Company provided a provision for doubtful accounts of $151,000 in the second quarter of 2015. On September 11, 2015, True Health Diagnostics announced the acquisition of HDL, in a court-supervised auction has not yet filed a plan of liquidation or reorganization. Thus, it is uncertain what distribution will be made on account of allowed claims. Further, the court approved HDL’s request to extend the exclusive deadline by which HDL may file a plan of liquidation or reorganization until early 2016.

Product Fee Revenues

The Company recognizes product fee revenue when it receives quarterly test sales reporting and payments thereunder from its partners. The Company has entered into worldwide license, development and commercialization agreements with Abbott Laboratories, (“Abbott”), bioMérieux SA, (“bioMérieux”), Siemens Healthcare Diagnostics Inc., (“Siemens”), and Alere Inc., (“Alere”). As consideration for the rights and licenses granted by the Company to its partners, the licensees pay to the Company a product fee, as set forth in the respective agreements, for tests sold to third parties. To date, only Abbott and bioMérieux have paid product fees to the Company.

 

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Product Fee Reclassification

Beginning in the third quarter of 2015, the Company began disclosing product fee revenue separately from product revenue. To maintain comparability, all previously reported product revenue figures in the accompanying unaudited condensed consolidated financial statements have been retroactively adjusted to break out the product fee revenue recognized during those periods. Management evaluated the amount and nature of the change and concluded that it was not material to either the previously reported annual or quarterly financial statement results of operations. Nonetheless, the Company has reclassified the historical statement of operations amounts included in this filing as follows (in thousands):

 

     As reported
Three months ended
September 30, 2014
     As reclassified
Three months ended
September 30, 2014
     As reported
Nine months ended
September 30, 2014
     As reclassified
Nine months ended
September 30, 2014
 

Product Revenues

   $ 695       $ 669       $ 2,233       $ 2,158   

Product Fee Revenues

     —           26         —           75   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Revenues

   $ 695       $ 695       $ 2,233       $ 2,233   
  

 

 

    

 

 

    

 

 

    

 

 

 

Inventory

Inventory is stated at the lower of cost or market. Costs are determined under the first-in, first-out (FIFO) method. Inventories consisted of the following:

 

(in thousands)    September 30, 2015      December 31, 2014  

Raw materials

   $ 45       $ 64   

Finished goods

     178         336   
  

 

 

    

 

 

 

Total inventories

   $ 223       $ 400   
  

 

 

    

 

 

 

Net Loss Per Share Attributable to Common Shareholders

Basic and diluted net loss per share attributable to common shareholders is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. The Company applied the two-class method to calculate its basic and diluted net loss per share of common stock, as its convertible preferred stock, common stock, and warrants to purchase common stock are participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common shareholders. However, the two-class method does not impact the net loss per share of common stock as the Company was in a loss position for each of the periods presented, and neither preferred shareholders nor warrant holders participate in losses.

The following table summarizes the computation of basic and diluted net loss per share for the three and nine months ended September 30, 2015 and 2014:

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2015      2014      2015      2014  
     (in thousands, except share and per share data)  

Net loss

   $ (1,023    $ (2,397    $ (4,401    $ (6,744

Preferred stock dividend

     (41      —           (41      —     

Deemed dividend on beneficial conversion feature

     (1,507      —           (1,507      —     

Accretion of convertible preferred stock to liquidation value

     (56      —           (56      —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net loss attributable to common shareholders

   $ (2,627    $ (2,397    $ (6,005    $ (6,744

Weighted average number of shares - basic and diluted

     9,862,802         8,604,312         9,057,960         8,028,373   

Net loss per share attributable to common shareholders - basic and diluted

   $ (0.27    $ (0.28    $ (0.66    $ (0.84

As of September 30, 2015 and 2014, the following potential common shares were excluded from the computation of diluted net loss per share because they had an antidilutive impact due to the losses reported:

 

     September 30,  
     2015      2014  

Options to purchase common stock

     699,513         644,789   

Warrants to purchase common stock

     1,536,929         216,156   

 

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3. Fair Value of Financial Instruments

At September 30, 2015, the Company’s financial instruments consisted of cash, accounts receivable, and accounts payable. The carrying amounts of accounts receivable and accounts payable are considered reasonable estimates of their fair value, due to the short maturity of these instruments.

In accordance with U.S. generally accepted accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The assets or liabilities fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The table below sets forth a summary of changes in the fair value of the Company’s level 3 liability (preferred stock liability) for the three and nine months ending September 30, 2015:

 

     Three Months Ended
September 30, 2015
     Nine Months Ended
September 30, 2015
 
     (in thousands)  

Beginning balance

   $ 31       $ —     

Loss on recognition of preferred stock liability

     —           79   

Gain on revaluation of preferred stock liability

     (31      (79
  

 

 

    

 

 

 

Ending balance

   $ —         $ —     
  

 

 

    

 

 

 

The resulting initial recognition and subsequent revaluation were recorded as other income (expense) in the unaudited condensed consolidated statements of operations

The table below sets forth a summary of changes in the fair value of the Company’s secured convertible notes for the three and nine months ended September 30, 2015:

 

     Three Months Ended
September 30, 2015
     Nine Months Ended
September 30, 2015
 
     (in thousands)  

Beginning balance

   $ 929       $ —     

Proceeds from secured convertible note

     —           500   

Loss on fair value adjustment

     58         487   

Conversion of secured convertible notes

     (987      (987
  

 

 

    

 

 

 

Ending balance

   $ —         $ —     
  

 

 

    

 

 

 

The resulting fair value adjustment was recorded as other income (expense) in the unaudited condensed consolidated statements of operations.

The preferred stock liability was valued using the Black-Scholes option pricing model as of May 12, 2015, the issuance date of the secured convertible note, resulting in a fair value of $79,000. This valuation considered an underlying security price of $2.12, strike price of $2.68, risk-free interest rate of 0.02%, expected dividend yield of 0%, volatility factor of 73.8%, and expected term of 0.22 years. The preferred stock liability was revalued as of June 30, 2015 resulting in a fair value of $31,000. This valuation considered an underlying security price of $2.00, strike price of $2.68, risk-free interest rate of 0.03%, expected dividend yield of 0%, volatility factor of 73.8%, and expected term of 0.08 years. As of July 14, 2015, the mandatory conversion of the preferred stock occurred, resulting in a remaining term of zero and thereby a fair value of zero.

The secured convertible promissory notes valuation analysis was based on the probability-weighted expected return method (“PWERM”) utilizing various scenarios for the expected payout of the instrument covering the full range of the potential outcomes. The PWERM determines the value of an instrument, based upon an analysis of future values for the subject instruments, which takes into consideration the full range of the potential cash flows available to the subject instrument. The instrument value is based upon the present value of the probability of each future outcome becoming available to the instrument, and the economic rights and preferences of the instrument.

 

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Due to the lack of relevant and market reflective Level 1 and Level 2 inputs, the Company valued the instruments using Level 3 inputs, which require significant judgment and estimates on behalf of management in developing model assumptions. The fair value model used in valuing the convertible debt instrument as of June 30, 2015 utilized the following inputs: conversion price per share, current and future stock prices, discount rate, and volatility. The following assumptions were made in the model: (1) conversion price of $2.68 per share, (2) current common stock price of $2.36 per share, (3) simulated future common stock price of $2.14 per share, (4) discount rate of 18.0%, (5) expected stock price volatility related to the current common stock price of 51.0%, and (6) expected stock price volatility related to the simulated future common stock price of 55.0%. At the conversion date of July 14, 2015, the following inputs were utilized in valuing the convertible debt instrument: (1) conversion price of $3.33 per share, (2) current common stock price of $1.54 per share, (3) discount rate of 18.0%, and (4) expected stock price volatility of 56.2%.

 

4. Term Loan

On February 10, 2012, the Company entered into a secured term loan facility, and a term loan in the aggregate principal amount of $10.0 million was funded upon the closing of the transaction. On July 14, 2015, the Company paid off all of its outstanding obligations under that certain Loan and Security Agreement by and among the Company, General Electric Capital Corporation (“GECC”) as agent and the lenders and the guarantors thereto dated as of February 10, 2012, as amended (the “GECC Agreement”), and terminated the GECC Agreement. The security interest granted by the Company to GECC in its assets in connection with the GECC Agreement was also terminated at the time of the payoff. Notwithstanding the payoff, the warrants to purchase the Company’s common stock that the Company previously issued to GECC’s affiliate, GE Capital Equity Investments, Inc., and Comerica Bank in connection with the GECC Agreement, continue to remain outstanding in accordance with their terms and are not affected by the payoff.

 

5. Commitments and Contingencies

From time to time, the Company may be subject to various legal proceedings and claims arising in the ordinary course of business. The Company assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

No amounts related to contingencies are accrued at September 30, 2015, as there are no ongoing proceedings.

 

6. Follow-on Public Offerings

On April 8, 2014, the Company closed a follow-on underwritten public offering of 1,613,000 shares of its common stock, at an offering price of $6.20 per share, for gross proceeds of $10.0 million. The net offering proceeds received by the Company, after deducting underwriting discounts and commissions and expenses incurred in connection with the offering, were approximately $9.0 million.

On August 18, 2015, the Company closed on an underwritten public offering of (i) 2,315,654 Series A units, each consisting of one share of common stock and one half of a warrant to purchase one share of common stock, at a purchase price of $1.00 per Series A unit, and (ii) 184,346 Series B units, in lieu of Series A units, at a purchase price of $1.00 per Series B unit to those purchasers whose purchase of additional Series A units in the offering would result in the purchaser beneficially owning more than 9.99% of the Company’s outstanding common stock following the completion of the offering. Each Series B unit consists of one fully pre-funded warrant to purchase one share of common stock and one half of a warrant to purchase one share of common stock. The warrants (other than the fully pre-funded warrants) have an exercise price of $1.00 per share. The net offering proceeds received by the Company, after deducting discounts and commissions and expenses incurred with the offering, were approximately $2.0 million.

 

7. Convertible Promissory Notes and Series A Preferred Stock

On May 12, 2015, the Company entered into a Securities Purchase Agreement (the “Series A Purchase Agreement”) with the Company’s principal stockholders. On May 12, 2015 (the “Initial Closing”), pursuant to the terms and subject to the conditions contained in the Series A Purchase Agreement, the Company issued and sold to the Purchasers secured convertible promissory notes in the aggregate principal amount of $0.5 million (the “Notes”). In addition, the Company agreed to issue to the Purchasers, and the Purchasers agreed to purchase from the Company, an aggregate of $2.0 million of shares of Series A Preferred Stock, $0.001 par value per share (the “Series A Preferred Stock”), at the second closing. The Company determined that the liability to issue the Series A Preferred Stock (the “Preferred Stock Liability”) at a future date was a freestanding instrument and should be accounted for as a liability. The Company remeasures the Preferred Stock Liability at fair value at each reporting period, with changes being recorded within other (loss) income in the unaudited condensed consolidated statements of operations. During the three month period ending September 30, 2015, the Company recorded other income of $31,000 upon remeasurement of the Preferred Stock Liability.

 

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The Notes contained a compound embedded derivative that requires separate accounting from the host debt instrument. The Company elected the fair value option for the Notes as management believes recording the Notes at fair value better reflects the underlying economics of the transaction. The Company remeasures the Notes at fair value at each reporting period, with changes being recorded within other (loss) income in the unaudited condensed consolidated statements of operations.

Upon consummation of the Series A Purchase Agreement, the Company allocated the total principal proceeds of $0.5 million between the Preferred Stock Liability and the fair-valued Notes and recorded a loss of $0.5 million in other (loss) income in the unaudited condensed consolidated statements of operations.

Pursuant to the terms of the Series A Purchase Agreement, and as approved by the Company’s stockholders at the Company’s 2015 Annual Meeting, the Company issued and sold to the Purchasers $2.0 million in shares of Series A Preferred Stock at the second closing that was held on July 14, 2015 (the “Second Closing”).

Secured Convertible Promissory Notes and Related Agreements

At the Second Closing, the Notes were automatically converted pursuant to their terms into that number of shares of Series A Preferred Stock equal to the principal amount of the Notes plus all accrued but unpaid interest thereon divided by the purchase price of the Series A Preferred Stock of $1.7003 per share (the “Purchase Price”).

Contemporaneously with the execution and delivery of the Series A Purchase Agreement and the issuance of the Notes by the Company to the Purchasers, the Company and the Purchasers entered into a Security Agreement (the “Security Agreement”), dated May 12, 2015, pursuant to which the Company granted to the Purchasers a security interest in substantially all of the Company’s assets, other than the Company’s intellectual property, to secure the Company’s obligations under the Notes. Pursuant to the terms of the Security Agreement, the Company’s intellectual property would have become subject to the security interest granted by the Company to the Purchasers upon repayment of all amounts owed under that certain Loan and Security Agreement by and among the Company, General Electric Capital Corporation (“GECC”) as Agent, the Lenders and the Guarantors dated as of February 10, 2012, as amended (“the “GECC Agreement”) referred as the “Term Loan” (See Note 4). Pursuant to a Subordination and Intercreditor Agreement by and among the Company, the Purchasers and GECC, dated May 12, 2015, entered into contemporaneously with the execution and delivery of the Series A Purchase Agreement, the Company’s payment obligations under the Notes were subordinated to the Company’s payment obligations under the GECC Agreement and the security interest granted by the Company to the Purchasers to secure the Company’s obligations under the Notes was subordinated to the security interest granted by the Company to GECC to secure the Company’s obligations under the GECC Agreement. In connection with the entry into the Series A Purchase Agreement, the Company and GECC amended the GECC Agreement, dated May 12, 2015, to, among other things, permit the Company to enter into the Series A Purchase Agreement and related agreements. Upon the conversion of the Notes into shares of Series A Preferred Stock at the Second Closing, the security interest granted under the Security Agreement was terminated.

The Second Closing was subject to the approval of the Company’s stockholders at the 2015 Annual Meeting in July 2015 and the satisfaction or waiver of other closing conditions. The Company’s stockholders approved the issuance of shares of Series A Preferred Stock, shares of Series A Preferred Stock issuable upon conversion of the Notes and common stock issuable upon conversion of Series A Preferred Stock, at the 2015 Annual Meeting held on July 7, 2015.

On July 14, 2015, the Company and the Purchasers entered into the First Amendment to the Series A Purchase Agreement (the “First Amendment”) pursuant to which the Company and the Purchasers agreed to extend the period of time following the Company’s 2015 Annual Meeting for the Second Closing to occur until July 14, 2015. At the Second Closing, pursuant to the terms of the Series A Purchase Agreement, the Company issued and sold to the Purchasers 1,176,262 shares of newly designated Series A Preferred Stock of the Company at the Purchase Price of $1.7003 per share for aggregate gross cash proceeds of approximately $2.0 million. In addition, at the Second Closing, the $500,000 in aggregate principal amount of Notes, plus accrued but unpaid interest, that the Company had issued to the Purchasers in the Initial Closing, converted into 298,181 shares of Series A Preferred Stock at the Purchase Price. Following the Second Closing in July 2015, the Company had issued an aggregate of 1,474,443 shares of Series A Preferred Stock, which remain outstanding and held by the Purchasers.

The shares of Series A Preferred Stock have the rights, preferences and privileges set forth in the Restated Certificate of Designations to the Company’s Restated Certificate of Incorporation (the “Certificate of Designations”) that was filed by the Company on August 18, 2015 with the Secretary of State of the State of Delaware. The rights, preferences and privileges of the Series A Preferred Stock are as follows:

Dividends

Holders of Series A Preferred Stock will be entitled to receive, out of funds legally available for the payment of dividends under Delaware law, cumulative dividends that accrue daily at an annual rate of 8%, compounded and payable quarterly in cash or in additional shares of Series A Preferred Stock at the election of each holder. The holders of Series A Preferred Stock will also be entitled to participate in cash dividends and in-kind distributions made on shares of common stock.

The Board of Directors has not declared any dividends on common or preferred stock. At September 30, 2015, the cumulative undeclared dividends on preferred stock total $41,000, and are included as a deduction in determining net loss per share attributable to common shareholders. The carrying value of the Series A Preferred Stock was not adjusted for the cumulative undeclared dividends as the Series A Preferred Stock is not probable of becoming redeemable.

Voting Rights

Holders of Series A Preferred Stock will be entitled to vote with the holders of the common stock on an as-converted basis, except that no holder of Series A Preferred Stock will be entitled to cast votes for the number of shares of common stock issuable upon conversion of the Series A Preferred Stock held by such holder that exceeds (subject to a proportionate adjustment in the event of a stock split, stock dividend, combination or other proportionate recapitalization) the quotient of (A) the aggregate purchase price paid by such holder for its Series A Preferred Stock, divided by (B) the greater of (i) $3.20 and (ii) the closing price of the common stock on the trading day immediately prior to the date its Series A Preferred Stock is issued, which was $1.40. In addition, prior to the conversion of the Series A Preferred Stock, the consent of the holders of at least a majority of the Series A Preferred Stock then outstanding, voting together as a single class, will be required for the Company to take certain actions, including, among other things: liquidating, dissolving or winding up the business and affairs of the Company or effecting any merger, consolidation or other liquidation event; amending, altering or repealing any provision of the Certificate of Incorporation, the Certificate of Designations or the Bylaws of the Company; creating or authorizing any class or series of capital stock ranking senior to or on parity with the Series A Preferred Stock or increasing the number of authorized shares of Series A Preferred Stock; purchasing, redeeming, paying or declaring dividends on any shares of capital stock of the Company, with certain exceptions; increasing or decreasing the size of the Board of Directors of the Company (the “Board”); and certain other actions.

Conversion Rights

Each share of Series A Preferred Stock is convertible into one share of common stock at any time at the option of each holder and automatically upon the written consent of the holders of a majority of the outstanding shares of Series A Preferred Stock. The conversion price will be subject to adjustment in connection with stock splits, combinations, dividends and other corporate transactions affecting the common stock. All other anti-dilution protections that had been provided to the Series A Preferred Stock upon issuance terminated following the Second Closing.

A contingent beneficial conversion feature was recognized during the three months ending September 30, 2015 as a result of the conversion price being adjusted from $1.7003 to $1.00 at the time of the Second Closing. The Company recorded $1.5 million relating to the contingent beneficial conversion as a deemed dividend. The $1.5 million was included within additional paid-in capital in the condensed consolidated financial statements, and reduced the carrying value of the Series A Preferred Stock. Since the Series A Preferred Stock has no stated redemption date and is immediately convertible, the $1.5 million deemed dividend was immediately accreted, resulting in an increase in the carrying value of the Series A Preferred Stock. The deemed dividend was included as a deduction in determining net loss per share attributable to common shareholders. The conversion price adjustment feature expired following the Second Closing.

Redemption Rights

All redemption rights that had been provided to the Series A Preferred Stock upon issuance terminated following the Second Closing.

Ranking

The Series A Preferred Stock will rank senior in preference and priority to the Company’s common stock and each other class or series of capital stock of the Company, except for any class or series of capital stock issued in compliance with the terms of the Restated Certificate of Designations.

Liquidation Preference

Upon liquidation, including deemed liquidations pursuant to a merger, consolidation or a sale of all or substantially all of the Company’s assets, the holders of Series A Preferred Stock will be entitled to be paid first out of any proceeds in an amount per share equal to the price at which shares of Series A Preferred Stock were sold in the Series A Preferred Stock financing, plus all accrued but unpaid dividends on each share of Series A Preferred Stock, and prior to payment of any amounts on the Company’s common stock. Thereafter, the holders of Series A Preferred Stock will also share pro rata on an as converted to common stock basis in payments made to the holders the Company’s common stock. Accordingly, the holders of the Series A Preferred Stock will be entitled to receive the proceeds out of any sale or liquidation of the Company before any such proceeds are paid to holders of the Company’s common stock and then share in any proceeds paid to holders of the Company’s common stock. As a result, only the sale or liquidation proceeds in excess of the liquidation preference plus accrued but unpaid dividends would be available for distribution to holders of the Company’s common stock.

The commissions and issuance costs associated with the Series A Preferred Stock financing were deducted from the carrying value of the Series A Preferred Stock, resulting in the carrying value of the Series A Preferred Stock being reduced below its liquidation value. The Company accretes the carrying value of the Series A Preferred Stock over the period from the date of issuance to the earliest redemption date using the effective interest method. During the nine months ending September 30, 2015, the Company recorded one month of accretion, totaling $56,000, at which point the Company ceased accretion as the Series A Preferred stock was not probable of becoming redeemable.

Board of Directors

Holders of Series A Preferred Stock will be entitled to nominate one director to the Board (the “Series A Director”). Subject to applicable law and stock exchange requirements, the Series A Director will be entitled to serve as a member of each committee of the Board. The rights to nominate a Series A Director will terminate if less than 20% of the shares of Series A Preferred Stock issued under the Securities Purchase Agreement dated May 12, 2015, as amended, by and between the Company and the Series A Holders are no longer outstanding.

Registration Rights

The Company shall comply with all federal and state laws, rules and regulations and applicable rules and regulations of the Exchange on which shares of the common are then listed. If any shares of common to be reserved for the purpose of conversion of Series A Preferred Stock require registration with or approval of any Person or group (as such term is defined in Section 13(d)(3) of the Exchange Act) under any federal or state law or the rules and regulations of the Exchange on which shares of the common stock are then listed before such shares may be validly issued or delivered upon conversion, then the Company will, as expeditiously as reasonably practicable, use commercially reasonable efforts to secure such registration or approval, as the case may be. So long as any common stock into which the of Series A Preferred Stock are then convertible is then listed on an Exchange, the Company will list and keep listed on any such Exchange, upon official notice of issuance, all shares of such common stock issuable upon conversion.

As the holders of the Series A Preferred Stock are entitled to receive liquidation preferences that other equity holders are not entitled to, the Company determined that the preferred stock should be classified as temporary equity in the condensed consolidated financial statements.

The Company reviews the rights and preferences of its equity securities for any changes in terms, rights or preferences to determine if such change is a modification or an extinguishment. The Company evaluates amendments to equity securities using a qualitative method which considers the business purpose for the amendment and whether it adds, deletes or significantly changes a substantive contractual term or the nature of the equity securities. An amendment that changes a substantive contractual term or fundamentally changes the nature of the share of preferred stock is considered an extinguishment. If considered an extinguishment, the Company accounts for the removal of the carrying value of the old securities and recognizes the new securities at their current fair value. An amendment that does not meet these criteria is a modification. If considered a modification, the Company estimates the fair value of the equity security pre- and post- modification and recognizes the incremental fair value, if any, resulting from the modified terms. During the nine months ending September 30, 2015, the Company determined that all changes to the terms of the Series A Preferred Stock resulting from amendments made to the Certificates of Designations were not substantive and should be accounted for as a modification. The amendments did not result in a material change to the fair value of the Series A Preferred Stock.

 

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto that appear elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2014. In addition to historical information, the following discussion and analysis includes forward-looking information that involves risks, uncertainties and assumptions. Our actual results and the timing of events could differ materially from those anticipated by these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” in Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2014, as updated from time to time in our subsequent periodic and current reports filed with the Securities and Exchange Commission.

Overview

We are developing and commercializing diagnostic products that may be used to help guide the care and management of patients who suffer from heart failure and related disorders. Our BGM Galectin-3 Test is our first U.S. Food and Drug Administration, or FDA, cleared and CE Marked diagnostic product. It is currently available as a manual or non-automated blood test in the United States and the European Union, or EU.

We have entered into licensing agreements with leading diagnostic instrument manufacturers to develop and commercialize galectin-3 assays that will be performed on automated platforms that have been incorporated into routine practice in laboratories throughout the world. On December 23, 2014, the FDA granted 510(k) clearance for the ARCHITECT ® Galectin-3 assay, the first FDA cleared automated blood test for Galectin-3. On July 6, 2015, we issued a press release in which it announced that the ARCHITECT ® Galectin-3 assay is now available in the United States. This is the first automated test for galectin-3 to be introduced for commercial use in the United States. The ARCHITECT ® Galectin-3 assay is performed using the Abbott ARCHITECT ® automated immunoassay analyzer and is being commercialized through an agreement between the Company and Abbott.

We have evolved from a research and development company to a commercial diagnostics company. Our initial transition to a commercial organization began with the FDA 510(k) clearance of our first diagnostic product, the BGM Galectin-3 Test, in November 2010. The first stage of transition was substantially completed in the first half of 2013 with the elimination of research and development activities no longer core to our commercial strategy. The second stage of transition was initiated in anticipation of the U.S. introduction of automated testing for galectin-3 and the commencement of commercialization activities by our automated partners. In order to reduce operating expenses and extend our cash runway in anticipation of the commercial launch of automated testing for galectin-3, we implemented a reduction in our workforce on September 11, 2014. In so doing, we primarily eliminated our sales and marketing organizations and removed certain positions in other function areas, while preserving some senior management and other critical roles to support the clinical and commercial adoption of galectin-3 testing by providing support to the marketing and selling efforts of our automated partners, clinical research studies that have incorporated galectin-3 testing and by expanding the BGM Galectin-3 Test’s labeling indications for use through additional clinical studies and clearances by the FDA.

Our BGM Galectin-3 Test

Our BGM Galectin-3 Test is our first FDA cleared and CE Marked diagnostic product. It is an in vitro diagnostic device that quantitatively measures galectin-3 in serum or plasma by enzyme linked immunosorbent assay, or ELISA, on a microtiter plate platform. Heart failure patients with elevated galectin-3 levels as measured using our BGM Galectin-3 Test have been found to be at significantly greater risk of adverse outcomes, including death or hospitalization. Measurement of this protein biomarker is intended to be used in conjunction with clinical evaluation.

 

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Galectins are a family of proteins that appear to play important roles in inflammation, immunity and cancer. Galectin-3, a member of this family of proteins, appears to be a key protein mediator of fibrosis, scarring and tissue repair and has been implicated in fibrosis in the heart, human atherosclerotic lesions, liver, kidney and lung. Elevated galectin-3 levels have been associated with adverse outcomes in heart failure, cardiovascular disease, chronic renal disease, pulmonary disease, liver disease and cancer.

In animal experiments, administration of galectin-3 to the heart led to the development of cardiac fibrosis, or stiffening, in the heart muscle, a process that is often referred to as cardiac remodeling. In these animal studies, adverse remodeling reduced the heart’s ability to pump normally, causing the animals to develop heart failure. This link between galectin-3 and cardiac remodeling is significant and suggests that galectin-3 may be a useful biomarker for adverse cardiac remodeling, an important determinant of the clinical outcome of patients suffering from heart failure.

We have obtained an exclusive worldwide license to certain galectin-3 rights that relate to the association of this protein biomarker with heart failure. We have also filed several of our own patent applications related to galectin-3.

Our BGM Galectin-3 Test is currently available as a blood test in the United States and the EU.

Automated Testing For Galectin-3

Overview

We believe that automation of our galectin-3 test will broaden its acceptance by laboratory customers and, as a result, accelerate its clinical adoption. To that end, we have entered into licensing and commercialization agreements with four leading diagnostic instrument manufacturers to develop and commercialize automated instrument versions of our galectin-3 test. We have entered into worldwide license, development and commercialization agreements with Abbott Laboratories, or Abbott, bioMérieux SA, or bioMérieux, Siemens Healthcare Diagnostics Inc., or Siemens, and Alere Inc., or Alere. These diagnostic instrument manufacturers account for a significant percentage of the automated laboratory testing instruments that are used throughout the world. The installed customer base of these automated partners reflects all major segments of the diagnostics market, including hospital laboratories, national reference laboratories, regional laboratories and others.

Progress to Date

On December 23, 2014, the FDA granted 510(k) clearance for the ARCHITECT ® Galectin-3 assay, the first FDA cleared automated blood test for galectin-3 which is performed using the Abbott ARCHITECT ® automated immunoassay analyzer. The clearance was obtained based on a 510(k) submission made to the FDA in February 2014, on behalf of Abbott, by Fujirebio Diagnostics, Incorporated, or Fujirebio. This is the first automated test for galectin-3 to be cleared for use in the United States. On May 8, 2015, in anticipation of the U.S. market launch of the Abbott Laboratories’ (Abbott) ARCHITECT® Galectin-3 assay, we amended our license and development agreement with Abbott to account for market dynamic considerations since the Galectin-3 assay first began development in 2009. On July 6, 2015, we issued a press release in which we announced that the ARCHITECT ® Galectin-3 assay is now available in the United States. On July 27, 2015, we announced that in conjunction with the U.S. market introduction of automated testing for galectin-3, clinical and analytical performance data for galectin-3 testing using an Abbott ARCHITECT® automated immunoassay analyzer were presented at the 2015 American Association for Clinical Chemistry (AACC) Annual Meeting in Atlanta, GA.

In January 2013, bioMérieux obtained a CE Mark for its VIDAS® Galectin-3 assay and initiated its commercial launch in the EU. The VIDAS® Galectin-3 assay was developed by bioMérieux for the quantitative measurement of galectin-3 levels in blood using the bioMérieux VIDAS® automated and multiparametric immunoassay testing system. In April 2013, Abbott obtained a CE mark for its ARCHITECT® Galectin-3 assay and initiated its commercial launch in the EU.

 

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Recognition of Galectin-3 Testing in U.S. Guideline for the Management of Heart Failure

In June 2013, galectin-3 testing was recognized for the first time in the 2013 American College of Cardiology Foundation and the American Heart Association Guideline for the Management of Heart Failure. The ACCF/AHA Guideline is designed to assist clinicians in selecting the best management strategy for individual patients and provides expert analysis of data on prevention, diagnosis, risk stratification, and treatment. Galectin-3 testing has been assigned a Level of Evidence of ‘A’, multiple populations evaluated, and a Class of Recommendation corresponding to ‘May Be Considered’ for the purpose of additive risk stratification of acute heart failure patients, and a Level of Evidence of ‘B’, limited populations evaluated, and a Class of Recommendation of ‘May Be Considered’ for risk stratification of ambulatory heart failure patients. The guideline further notes that testing for galectin-3 is predictive of risk of adverse outcomes in heart failure, including hospitalization, and is additive to BNP and NT-proBNP testing for heart failure patient risk stratification. Writing committees are charged with regularly reviewing and evaluating all available evidence to develop balanced, patient-centric recommendations for clinical practice.

Reimbursement for Galectin-3 Testing

Approximately 70% of heart failure patients in the United States are of Medicare age. Therefore, reimbursement by Medicare is important to our laboratory customers. In the United States, for the 2014 calendar year, the Centers for Medicare and Medicaid Services, or CMS, published a 2014 Medicare national limitation amount for the galectin-3 blood test (analyte-specific CPT ® Code 82777) at the amount of a crosswalked test (analyte-specific CPT ® Code 84244) whose 2014 national limitation amount was $30.01. This national limitation replaced the galectin-3 blood test’s national limitation amount of $17.80 that was effective in 2013. In 2015, the national limitation amount for the galectin-3 blood test was reduced to $29.93 and applies across the U.S., except in Ohio and West Virginia where rates of $23.93 and $26.33, respectively, apply. In Europe, reimbursement is covered under the hospital budgeting process and typically applies to testing performed during emergency room visits and on hospital in-patients.

Our Commercial Strategy

We believe that the introduction of automated testing for galectin-3 will increase the adoption of galectin-3 testing. We believe that laboratory adoption of automated testing for galectin-3 will result in improved access to testing, shorten turn-around-time for receipt of test results, minimize objections related to the more labor intensive manual micro-titer plate testing method and, as a result, accelerate clinical adoption of galectin-3 testing.

We are commercializing the first FDA cleared automated test for galectin-3 through an agreement with Abbott whereby Abbott will promote, market, sell and distribute its automated test for galectin-3 to laboratory customers who utilize Abbott’s ARCHITECT ® immunoassay analyzer to perform automated testing for other analytes as well. We will support Abbott’s commercialization efforts by promoting the utility of galectin-3 as a clinical biomarker. In light of Abbott’s limited experience with commercialization of an automated assay for galectin-3, the timing or extent to which Abbott will be successful in driving customer adoption of the ARCHITECT ® Galectin-3 test is as yet uncertain.

We have evolved from a research and development company to a commercial diagnostics company. Our initial transition to a commercial organization began with the FDA 510(k) clearance of our first diagnostic product, the BGM Galectin-3 Test, in November 2010. The first stage of transition was substantially completed in the first half of 2013 with the elimination of research and development activities no longer core to our commercial strategy. The second stage of transition was initiated in anticipation of the U.S. introduction of automated testing for galectin-3 and the commencement of commercialization activities by our automated partners. In order to reduce operating expenses and extend our cash runway in anticipation of the commercial launch of automated testing for galectin-3, we implemented a reduction in our workforce on September 11, 2014. In so doing, we primarily eliminated our sales and marketing organizations and removed certain positions in other function areas, while preserving some senior management and other critical roles to support the clinical and commercial adoption of galectin-3 testing by providing support to the marketing and selling efforts of our automated partners, clinical research studies that have incorporated galectin-3 testing and by expanding the BGM Galectin-3 Test’s labeling indications for use through additional clinical studies and clearances by the FDA.

 

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Our Product Pipeline

New Clinical Claims and Indications for the BGM Galectin-3 Test

We believe that the clinical and commercial value of our BGM Galectin-3 Test may extend beyond its current indications for use. On March 31, 2015, we filed for premarket 510(k) notification with the FDA in order to obtain regulatory clearance to market our BGM Galectin-3 Test in the United States for a new indication for use, as an aid in the assessment of near-term risk of fatal cardiovascular events in older adults who have no prior history of coronary heart disease, cerebrovascular disease, or vascular disease. The clinical validation study submitted as part of the 510(k) notification comprised an analysis of specimens, using our BGM Galectin-3 Test, from the BioImage Study, a proprietary observational and community-based cohort of over 6,800 individuals who were followed since 2009.

Subject to obtaining substantial additional financing, we expect to pursue new clinical claims and indications for the BGM Galectin-3 Test in assessing heart failure, as well as in related disorders. Expansion of the product label to include new clinical claims and indications for use will require additional clinical studies and clearance, or approval, by regulatory bodies, such as the FDA, and inclusion in our CE Mark for use in the EU. Our ability to engage in these activities would require us to obtain substantial additional financing.

CardioSCORE™ Test

Our CardioSCORE test is a multi-analyte biomarker-based blood test that is designed as an aid in the assessment of near-term risk for significant atherothrombotic cardiovascular events, such as heart attack and ischemic stroke. The CardioSCORE test is a proprietary in vitro diagnostic multi-analyte assay in which the levels of multiple biomarkers are measured in blood and the results are mathematically integrated to yield a single numerical score that is predictive of an individual’s near-term atherothrombotic cardiovascular risk.

In December 2012, we obtained a CE Mark for the CardioSCORE test, which allows us to market the test in Europe and other countries that recognize CE Mark. However, as a result of our decision to focus our efforts on increasing the adoption and sales of our galectin-3 test, we have decided to redirect investments from a launch of the CardioSCORE test in Europe to support our galectin-3 efforts.

In December 2011, we filed for premarket 510(k) notification with the FDA in order to obtain regulatory clearance to market the CardioSCORE test in the United States as an aid in the assessment of near-term risk for significant cardiovascular events, such as heart attack and stroke. In response to this submission, the FDA requested that we engage an independent committee of physicians to conduct a medical review and adjudication of clinical endpoints reported in the submission. Due to the time involved in responding to this request, we withdrew the 510(k) on August 8, 2012. Our medical review also included the assessment of sample stability and the evaluation of other technical issues raised by the FDA. The adjudication process, now complete, yielded results that are broadly in line with what would be expected in a U.S.-based epidemiological cohort of this composition. While we may continue to explore potential opportunities to monetize CardioSCORE, we have redirected resources to support our development and commercialization of galectin-3 testing. Currently, we are not actively engaged in development or commercialization activities related to CardioSCORE.

BioImage Study Patient Cohort and Banked Specimens

We have exclusive rights to diagnostic inventions arising from our analysis of a proprietary observational and community-based cohort of over 6,800 individuals who have been followed since 2009. Baseline blood serum, plasma, DNA, and RNA samples collected from all participants have been stored and are available for our analysis. In addition, insurance claims data, including information regarding diagnoses, procedures, and therapies related to over 1,200 non-fatal cardiovascular events that were experienced by participants in the cohort over the more than four years since follow-up was initiated is available to us for data mining. We believe that this asset provides us with a unique and proprietary platform from which we may validate and develop new diagnostic products. We are currently employing the BioImage Study Patient Cohort and banked specimens to evaluate new applications of our BGM Galectin-3 Test. Our ability to continue to engage in these activities may require us to obtain additional financing.

Recent Developments

We have been in discussions with HDL, which is the largest customer of our BGM Galectin-3 ® Test, since its bankruptcy filing and HDL has indicated that it intends to continue operating its business, to purchase tests from us in the ordinary course and has agreed to accelerated payment terms and a limitation on amounts owed to us on such new orders. Shipments of galectin-3 test kits to HDL resumed on June 15, 2015 in volumes comparable to those that had been shipped immediately prior to the June 7, 2015 bankruptcy filing. On July 2, 2015, in accordance with the post-bankruptcy accelerated payment terms, we received timely payment from HDL for kit shipments the Company has made to HDL since June 15, 2015. Since that time, we have continued to receive timely payments from HDL, albeit on substantially smaller and less frequent orders. On September 11, 2015, True Health Diagnostics announced the

 

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acquisition of HDL, in a court-supervised auction. HDL has not yet filed a plan of liquidation or reorganization. Thus, it is uncertain what distribution will be made on account of allowed claims. Further, the court approved HDL’s request to extend the exclusive deadline by which HDL may file a plan of liquidation or reorganization until early 2016.

On July 14, 2015, we issued and sold 1,176,262 shares of our newly designated Series A Preferred Stock, $0.001 par value per share, or our Series A Preferred Stock, in a private placement to our principal stockholders at a purchase price of $1.7003 per share for aggregate gross cash proceeds of approximately $2.0 million. In addition, the $500,000 in aggregate principal amount of our senior secured convertible promissory notes, plus accrued but unpaid interest, that we previously issued to our principal stockholders on May 12, 2015 converted into 298,181 shares of Series A Preferred Stock. Following the closing, we had issued an aggregate of 1,474,443 shares of Series A Preferred Stock and incurred issuance costs of approximately $0.5 million.

On August 18, 2015, we closed on an underwritten public offering of (i) 2,315,654 Series A units, each consisting of one share of common stock and one half of a warrant to purchase one share of common stock, at a purchase price of $1.00 per Series A unit, and (ii) 184,346 Series B units, in lieu of Series A units, at a purchase price of $1.00 per Series B unit to those purchasers whose purchase of additional Series A units in the offering would result in the purchaser beneficially owning more than 9.99% of the Company’s outstanding common stock following the completion of the offering. Each Series B unit consists of one fully pre-funded warrant to purchase one share of common stock and one half of a warrant to purchase one share of common stock. The warrants (other than the fully pre-funded warrants) have an exercise price of $1.00 per share. The net offering proceeds received by the Company, after deducting discounts and commissions and expenses incurred with the offering were approximately $2.0 million.

Since September 16, 2015, our common stock has been quoted on the OTC Markets’ OTCQB market tier, an electronic quotation service operated by OTC Markets Group Inc. for eligible securities traded over-the-counter, where it trades under the trading symbol “BGMD.” As previously disclosed, our common stock had been listed for trading on The NASDAQ Capital Market until September 15, 2015. On September 14, 2015, we received a letter indicating that the NASDAQ Listing Qualifications Hearings Panel determined to delist the shares of our common stock from The NASDAQ Stock Market LLC, or NASDAQ, and suspend trading in our common stock on NASDAQ effective at the open of business on September 16, 2015 due to our continuing non-compliance with the stockholders’ equity requirement set forth in NASDAQ Listing Rule 5550(b) as of September 10, 2015.

Comparison of the Three Months ended September 30, 2015 and 2014

Revenues

Our product revenues are primarily derived from sales of the BGM Galectin-3 Test. Our product revenues have tended to be concentrated with a small number of laboratory providers generating a significant percentage of our revenues in any given reporting period. As a result, the timing of orders from these customers may fluctuate significantly from month to month and quarter to quarter.

The following table summarizes our total revenues for the three months ended September 30, 2015 and 2014:

 

    

 

Three Months Ended September 30,

     %
Increase
(Decrease)
 
     2015      2014     
     (in thousands)         

Product Revenues

   $ 274       $ 669         (59 %) 

Product Fee Revenues

     60       $ 26         131
  

 

 

    

 

 

    

 

 

 

Total Revenues

   $ 334       $ 695         (52 %) 

Revenues are comprised primarily of sales of our BGM Galectin-3 Test and decreased in the three months ended September 30, 2015 by $361,000, to $334,000 from $695,000 in the three months ended September 30, 2014. The decrease in product revenues resulted primarily from a 67% decline in orders from our largest customer. Product fee revenues are comprised of contractual payments as

 

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consideration for the rights and licenses granted by us to our partners. Abbott and bioMérieux pay to us a product fee, as set forth in their respective agreements, for tests sold to third parties. Product fee revenues increased in the three months ended September 30, 2015 by $34,000, to $60,000 from $26,000 in the three months ended September 30, 2014. The increase resulted primarily from increased sales by Abbott.

Product and Product Fee Costs

Our product costs consist of expenses related to our BGM Galectin-3 Test and royalties on product fees. These expenses include the contract-manufacturing of the tests, the medical device excise tax, freight and royalty expenses payable to the licensor of certain intellectual property relating to galectin-3 based on revenues generated from the sales of the test and product fees received.

The following table provides information with respect to our product and product fee costs and product margins for the three months ended September 30, 2015 and 2014:

 

    

 

Three Months Ended September 30,

    %
Increase
(Decrease)
 
     2015     2014    
     (in thousands)        

Product and product fee costs

   $ 103      $ 234        (56 %) 

Product gross margin

     69     66     3

Product and product fee costs decreased by 56%, or $131,000, to $103,000 in the three months ended September 30, 2015 as compared to $234,000 in the three months ended September 30, 2014. The decrease in product costs associated with product revenues was commensurate with the decrease in product revenue, and the increase in gross margin relates to the increase in product fee revenues which have a higher gross margin than product revenues.

 

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Operating Expenses

The following table summarizes our operating expenses for the three months ended September 30, 2015 and 2014:

 

    

 

Three Months Ended September 30,

     %
Decrease
 
     2015      2014     
     (in thousands)         

Operating expenses

        

Research and development

   $ 333       $ 724         (54 %) 

Selling and marketing

     4         647         (99 %) 

General and administrative

     920         1,323         (30 %) 
  

 

 

    

 

 

    

Total operating expenses

   $ 1,257       $ 2,694         (53 %) 
  

 

 

    

 

 

    

Research and development

Historically, we have incurred research and development expenses in connection with our internal biomarker discovery and development efforts. Our research and development expenses consist primarily of direct personnel costs, fees for consultants and outside services, laboratory consumables and overhead expenses. We use consultants and outside services to provide expertise or services that we do not have.

Research and development expenses decreased by 54%, or $391,000, to $333,000 in the three months ended September 30, 2015 as compared to $724,000 in the three months ended September 30, 2014. The decrease in research and development expenses for the current period over the prior period was primarily attributable to a decrease in salaries and consultant and professional service fees, partially offset by an increase in non-cash compensation.

Selling and marketing

Selling and marketing expenses consist primarily of costs related to supporting commercialization activities associated with our BGM Galectin-3 Test.

Selling and marketing expenses decreased by 99%, or $643,000, to $4,000 in the three months ended September 30, 2015 as compared to $647,000 in the three months ended September 30, 2014. The decreased expenditures were primarily due to the elimination of our sales team in the third quarter of 2014.

General and administrative

General and administrative expenses consist primarily of personnel-related expenses, allocated occupancy costs, and expenses related to operating as a public company. These expenses include legal and regulatory costs, directors’ and officers’ insurance premiums, investor relation services, and accounting and financial reporting expenses.

General and administrative expenses decreased by 30%, or $403,000, to $920,000 in the three months ended September 30, 2015 as compared to $1.3 million in the three months ended September 30, 2014. This decrease is due primarily to decreases in salaries, corporate legal fees, public company expenses and recruitment/relocation costs.

Other income and expense

The following table summarizes other (expense) income for the three months ended September 30, 2015 and 2014:

 

    

 

Three Months Ended September 30,

     %
Increase
(Decrease)
 
     2015      2014     
     (in thousands)         

Other (expense) income

        

Interest income/other (expense) income

   $ 7       $ 1         600

Interest expense

     (4      (165      (98 %) 
  

 

 

    

 

 

    

Total other (expense) income

   $ 3       $ (164      (102 %) 
  

 

 

    

 

 

    

Other (expense) income decreased by $167,000 primarily resulting from our repayment of the term loan with General Electric Capital Corporation and Comerica Bank in July 2015.

 

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Results of Operations

Comparison of the Nine Months ended September 30, 2015 and 2014

Revenues

The following table summarizes our total revenues for the nine months ended September 30, 2015 and 2014:

 

    

 

Nine Months Ended September 30,

     %
Increase
(Decrease)
 
     2015      2014     
     (in thousands)         

Product Revenues

   $ 1,160       $ 2,158         (46 %) 

Product Fee Revenues

     116       $ 75         55
  

 

 

    

 

 

    

 

 

 

Total Revenues

   $ 1,276       $ 2,233         (43 %) 

Product revenues are comprised primarily of sales of our BGM Galectin-3 Test and decreased in the nine months ended September 30, 2015 by $957,000, to $1.3 million, from $2.2 million in the nine months ended September 30, 2014. The decrease in product revenues resulted primarily from a 54% decline in orders from our largest customer. Product fee revenues are comprised of contractual payments as consideration for the rights and licenses granted by us to our partners. Abbott and bioMérieux pay to us a product fee, as set forth in their respective agreements, for tests sold to third parties. Product fee revenues increased in the nine months ended September 30, 2015 by $41,000, to $116,000 from $75,000 in the nine months ended September 30, 2014. The increase resulted primarily from increased sales by Abbott.

Product and Product Fee Costs

The following table provides information with respect to our product and product fee costs and product margins for the nine months ended September 30, 2015 and 2014:

 

    

 

Nine Months Ended September 30,

    %
Increase
(Decrease)
 
     2015     2014    
     (in thousands)        

Product and product fee costs

   $ 423      $ 764        (45 %) 

Product gross margin

     67     66     1

Product and product fee costs decreased by 45%, or $341,000, to $423,000 in the nine months ended September 30, 2015 as compared to $764,000 in the nine months ended September 30, 2014. The decrease in product costs associated with product revenues was commensurate with the decrease in product revenue, and the increase in gross margin relates to the increase in product fee revenues which have a higher gross margin than product revenues.

Operating Expenses

The following table summarizes our operating expenses for the nine months ended September 30, 2015 and 2014:

 

    

 

Nine Months Ended September 30,

     %
Decrease
 
     2015      2014     
     (in thousands)         

Operating expenses

        

Research and development

   $ 1,314       $ 1,855         (29 %) 

Selling and marketing

     289         2,069         (86 %) 

General and administrative

     2,978         3,696         (19 %) 
  

 

 

    

 

 

    

Total operating expenses

   $ 4,581       $ 7,620         (40 %) 
  

 

 

    

 

 

    

Research and development

Historically, we have incurred research and development expenses in connection with our internal biomarker discovery and development efforts. Our research and development expenses consist primarily of direct personnel costs, fees for consultants and outside services, laboratory consumables and overhead expenses. We use consultants and outside services to provide expertise or services that we do not have.

 

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Research and development expenses decreased by 29%, or $541,000, to $1.3 million in the nine months ended September 30, 2015 as compared to $1.9 million in the nine months ended September 30, 2014. The decrease in research and development expenses for the current period over the prior period was primarily attributable to a decrease in salaries and consultant and professional service fees, partially offset by an increase in non-cash compensation.

Selling and marketing

Selling and marketing expenses consist primarily of costs related to supporting commercialization activities associated with our BGM Galectin-3 Test.

Selling and marketing expenses decreased by 86%, or $1.8 million, to $289,000 in the nine months ended September 30, 2015 as compared to $2.1 million in the nine months ended September 30, 2014. The decreased expenditures were primarily due to the elimination of our sales team in the third quarter of 2014.

General and administrative

General and administrative expenses consist primarily of personnel-related expenses, allocated occupancy costs, and expenses related to operating as a public company. These expenses include legal and regulatory costs, directors’ and officers’ insurance premiums, investor relation services, and accounting and financial reporting expenses.

General and administrative expenses decreased by 19%, or $718,000, to $3.0 million in the nine months ended September 30, 2015 as compared to $3.7 million in the nine months ended September 30, 2014. This decrease is due primarily to a decrease in salaries, corporate legal fees, and recruitment/relocation costs, partially offset by an increase in costs associated with the corporate office relocation and the provision for doubtful accounts.

Other income and expense

The following table summarizes other (expense) income for the nine months ended September 30, 2015 and 2014:

 

    

 

Nine Months Ended September 30,

     %
Increase
(Decrease)
 
     2015      2014     
     (in thousands)         

Other (expense) income

        

Interest income/other (expense) income

     (514      4         (12,950 %) 

Interest expense

     (159      (597      (73 %) 
  

 

 

    

 

 

    

Total other expense

   $ (673    $ (593      13
  

 

 

    

 

 

    

Other expense increased by $80,000 primarily resulting from a loss on the fair value of the secured convertible debt and a loss on the disposal of property and equipment, partially offset by less interest expense due to our repayment of the term loan with General Electric Capital Corporation and Comerica Bank in July 2015.

Liquidity and Capital Resources

Sources of Liquidity

We believe that our existing cash will be sufficient to fund our operations into July 2016. Until we generate significant product revenues to reach cash breakeven, we will need to raise additional funds to finance our operations beyond July 2016. To date, our primary sources of liquidity have included our cash balances, sales of our equity securities, our term loan, product revenue from sales of our BGM Galectin-3 Test, and service revenue from the HRP initiative. As of September 30, 2015, we had $2.6 million of cash.

Series A Preferred Stock and Secured Convertible Promissory Note Financing

On May 12, 2015, we received additional cash of $0.5 million from the sale of our secured convertible promissory notes to purchasers affiliated with Flagship Ventures in accordance with the terms of a Securities Purchase Agreement, or Series A Purchase Agreement, that we entered into on May 12, 2015. On July 14, 2015, we issued and sold 1,176,262 shares of our newly designated Series A Preferred Stock, $0.001 par value per share, or our Series A Preferred Stock, in a private placement to purchasers affiliated with Flagship Ventures at a purchase price of $1.7003 per share for aggregate gross cash proceeds of approximately $2.0 million. In addition, the $500,000 in aggregate principal amount of our secured convertible promissory notes, plus accrued but unpaid interest, that we previously issued converted into 298,181 shares of Series A Preferred Stock. Following the closing, we had issued an aggregate of 1,474,443 shares of Series A Preferred Stock.

 

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Follow-on Underwritten Public Offerings

On August 18, 2015, we closed on an underwritten public offering of (i) 2,315,654 Series A units, each consisting of one share of common stock and one half of a warrant to purchase one share of common stock, at a purchase price of $1.00 per Series A unit, and (ii) 184,346 Series B units, in lieu of Series A units, at a purchase price of $1.00 per Series B unit to those purchasers whose purchase of additional Series A units in the offering would result in the purchaser beneficially owning more than 9.99% of the Company’s outstanding common stock following the completion of the offering. Each Series B unit consists of one fully pre-funded warrant to purchase one share of common stock and one half of a warrant to purchase one share of common stock. The warrants (other than the fully pre-funded warrants) have an exercise price of $1.00 per share. The net offering proceeds that we received, after deducting discounts and commissions and expenses incurred with the offering were approximately $2.0 million.

On April 8, 2014, we closed a follow-on underwritten public offering of 1,613,000 shares of our common stock, at an offering price of $6.20 per share, for gross proceeds of $10.0 million. The net offering proceeds that we received, after deducting underwriting discounts and commissions and expenses incurred in connection with the offering, were approximately $9.0 million.

Strategic Alternatives

On November 13, 2014, we announced that we had retained Stifel Nicolaus & Company, Incorporated, an investment banking firm, to assist us in reviewing and evaluating strategic alternatives. We engaged in that formal process during the ten months that followed our announcement and we recently terminated our formal engagement with Stifel.

Common Stock Purchase Agreement with Aspire

On January 24, 2013, we entered into a Common Stock Purchase Agreement, or the Aspire Agreement, with Aspire Capital Fund, LLC, or Aspire, to purchase, at our option, up to an aggregate of $12.0 million of shares of our common stock over a two-year term.

The Company did not sell any shares under the Aspire Agreement, which expired in June 2015.

Secured Term Loan Facility

In February 2012, we entered into a secured term loan facility with General Electric Capital Corporation and Comerica Bank, and a term loan in the aggregate principal amount of $10.0 million was funded to us upon the closing of the transaction. The term loan accrues interest at a rate of 8% per annum plus the higher of (a) the 3-month LIBOR rate or (b) 1.25%. Interest only payments were made for the first twelve months of the loan term. Following that initial twelve month period, principal and interest payments are required to be paid on a monthly basis through maturity in August 2015.

At September 30, 2015, we had $0 outstanding under the term loan, having paid off all of our outstanding obligations under the term loan on July 14, 2015.

Quotation of Our Common Stock on the OTCQB Following NASDAQ De-listing

Our common stock had been listed on The NASDAQ Capital Market until September 15, 2015, when it was suspended for failure to comply with The NASDAQ Capital Market continued listing standards. On September 16, 2015, our common stock began trading on the OTC Markets’ OTCQB market tier under the trading symbol “BGMD.” The delisting of our common stock from The NASDAQ Capital Market could substantially further reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, the delisting could negatively affect us by reducing the number of investors willing to hold or acquire our common stock, which could negatively affect our ability to raise capital, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities.

 

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Net Cash Flows

Cash (used in) provided by operating, investing and financing activities for the nine months ended September 30, 2015 and 2014 is summarized as follows:

 

     Nine Months Ended September 30,  

Summary Cash Flow Information

   2015      2014      Change  
     (in thousands)  

Net cash (used in) provided by:

        

Operating activities

   $ (2,550    $ (7,097    $ 4,547   

Investing activities

     13         —           13   

Financing activities

     1,056         5,659         (4,603
  

 

 

    

 

 

    

 

 

 

Net (decrease)/increase in cash

     (1,481      (1,438      (43
  

 

 

    

 

 

    

 

 

 

Cash at end of period

   $ 2,642       $ 6,313       $ (3,671
  

 

 

    

 

 

    

 

 

 

Nine Months Ended September 30, 2015 and 2014

Net cash used in operating activities decreased primarily due to a decrease in our net loss, an increase in non-cash charges and changes in operating assets and liabilities for the nine month period ended September 30, 2015 compared to the same period in 2014. The changes in working capital related primarily to an increase in accounts payable, accrued expenses and other current liabilities in 2015 compared to a large decrease in 2014,

Net cash provided by investing activities increased due to the proceeds received from the sale of property and equipment in the nine month period ended September 30, 2015 for which we received no similar proceeds in the nine month period ended September 30, 2014.

Net cash provided by financing activities decreased because the net proceeds from the follow-on public offering in 2014 were larger than the aggregate of the net proceeds from the 2015 public offering and the private placement of Series A Preferred Stock and secured convertible promissory notes, partially offset by a decrease in term debt payments in the nine month period ended September 30, 2015 as compared to the same period in 2014, due to the extinguishment of the term loan in July 2015.

Funding Requirements

During the nine months ended September 30, 2015, we incurred a net loss of $4.4 million and used $2.6 million of cash in operations, and expect to continue to incur losses and use cash during 2015 and beyond. At September 30, 2015, we had cash totaling $2.6 million, and an outstanding balance of $0 under our secured term loan facility having paid off all of our outstanding obligations under the secured term loan facility on July 14, 2015.

 

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Effective January 1, 2014, the payment rate at which our BGM Galectin-3 Test is reimbursed by CMS was increased to $30.01 from $17.80 per test. In 2015, the national limitation amount for our BGM Galectin-3 Test was reduced to $29.93 and applies across the U.S., except in Ohio and West Virginia where rates of $23.93 and $26.33, respectively, apply. We are in the early stages of commercializing testing for galectin-3. Interest in the galectin-3 testing is increasing as a result of our market development activities, although it has not yet translated into significant revenue. In order to achieve profitability, we will need to generate significant product revenues.

We believe that our existing cash will be sufficient to fund our operations into July 2016. Until we generate significant product revenues to reach cash breakeven, we will need to raise additional funds to finance our operations beyond July 2016. We may not be able to obtain adequate financing to do so when necessary, and the terms of any financings may not be advantageous to us and any financings may result in dilution to our stockholders.

The above circumstances along with our history and near term forecast of incurring net losses and negative operating cash flows raise substantial doubt regarding our ability to continue as a going concern for a reasonable period of time. The accompanying condensed consolidated financial statements have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to our ability to continue as a going concern.

Our forecast of the period of time through which our financial resources will be adequate to support our operations and the cost to develop and commercialize our products are forward-looking statements and involve risks and uncertainties, and actual results could vary materially and negatively as a result of a number of factors, including the factors discussed in the “Risk Factors” section of this report, in the “Risk Factors” section of our Quarterly Report on Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015 and in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2014. We have based these estimates on assumptions that may prove to be incorrect, and we could utilize our available capital resources sooner than we currently expect.

Our future liquidity and capital funding requirements will depend on numerous factors, including:

 

    our ability to raise additional funds to finance our operations;

 

    the revenue generated by sales of our cardiovascular diagnostic tests;

 

    the rate of progress and cost of our commercialization activities, including the launch of the galectin-3 test on Abbotts’ automated platform;

 

    the rate of adoption by new customers of automated galectin-3 testing and the rate of migration by existing customers of manual galectin-3 testing to automated galectin-3 testing;

 

    the outcome, costs and timing of seeking regulatory clearance for our product candidates and for additional indications for existing products;

 

    the success of our development efforts;

 

    the expenses we incur in marketing and selling our products;

 

    the emergence and effect of competing or complementary products;

 

    our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;

 

    our ability to retain our current employees and the need and ability to hire additional management and scientific and medical personnel;

 

    our need to implement additional internal systems and infrastructure, including financial and reporting systems;

 

    the terms and timing of any collaborative, licensing or other arrangements that we have or may establish;

 

    the trading price of our common stock; and

 

    the effect of the quotation of our common stock on the OTCQB and the delisting of our common stock from The NASDAQ Capital Market.

 

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Contractual Obligations and Commitments

There have been no material changes to our contractual obligations and commitments set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations and Commitments” in our Annual Report on Form 10-K for the year ended December 31, 2014.

Critical Accounting Policies and Significant Judgments and Estimates

A summary of our significant accounting policies is contained in the notes to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2014. There have been no material changes to those policies during the nine months ended September 30, 2015.

Certain Factors That May Affect Future Results of Operations

The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other important factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

 

    the timing and sales ramp of new customers for Abbott’s automated galectin-3 test and the migration of our existing customers of manual galectin-3 testing to automated galectin-3 testing;

 

    our ability to raise additional funds to finance our operations;

 

    the commercialization by Abbott of its FDA-cleared version of the galectin-3 test on Abbott’s automated platform;

 

    our ability to continue as a going concern;

 

    our estimates of future performance, including the commercialization and sales of our galectin-3 test;

 

    our ability to provide sufficient evidence of clinical utility for our galectin-3 test and to differentiate it from competing cardiovascular diagnostics tests;

 

    our ability to obtain regulatory clearance from the FDA for our CardioSCORE test and cardiovascular risk assessment and additional indications for our galectin-3 test;

 

    our ability to successfully market, commercialize and achieve widespread market penetration for our cardiovascular diagnostic tests;

 

    our ability to conduct the clinical studies required for regulatory clearance or approval and to demonstrate the clinical benefits and cost-effectiveness to support commercial acceptance of our products;

 

    the timing, costs and other limitations involved in obtaining regulatory clearance or approval for any of our products;

 

    the potential benefits of our cardiovascular diagnostic tests over current medical practices or other diagnostics;

 

    the ability of our automated partners to develop and obtain regulatory clearance of galectin-3 tests that can be performed on their automated platforms and to commercialize any such tests;

 

    willingness of third-party payers to reimburse for the cost of our tests;

 

    our ability to enter into collaboration and distribution agreements with respect to our cardiovascular diagnostic tests, the performance of our partners under such agreements and the potential benefits of these arrangements;

 

    estimates of market sizes and anticipated uses of our cardiovascular diagnostic tests;

 

    our ability to obtain and maintain intellectual property protections for our products and operate our business without infringing upon the intellectual property rights of others;

 

    the expected timing, progress or success of our development and commercialization efforts;

 

    our ability to successfully obtain sufficient and appropriate blood samples for our validation tests in support of our regulatory filings for our cardiovascular tests;

 

    the effect of the quotation of our common stock on the OTCQB and the delisting of our common stock from The NASDAQ Capital Market;

 

    our ability to enter into a strategic transaction that increases stockholder value;

 

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    the success of competing cardiovascular diagnostic tests that are or become available;

 

    regulatory developments in the United States and other countries in which we sell or plan to sell our tests;

 

    the performance of our third-party suppliers and the manufacturer of our galectin-3 tests; and

 

    our estimates regarding anticipated operating losses, future revenue, expenses, capital requirements and our needs for additional financing.

Words such as “may,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to those set forth under the heading “Risk Factors” contained in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2014 as supplemented by the risk factors discussed under “Risk Factors” in Part II, Item 1A. of this Quarterly Report on Form 10-Q and “Risk Factors” in Part II – Item 1A, of our Quarterly Report on Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015.

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report on Form 10-Q or in any document incorporated herein by reference might not occur. Stockholders are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements attributable to BG Medicine, Inc. or to any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

 

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes from the information provided in our Annual Report on Form 10-K for the year ended December 31, 2014, except as noted below:

Currency Exchange Rates

We have limited foreign currency exchange rate risk. The effect of an immediate 10% change in current foreign currency exchange rates would not have a material impact on our financial condition, results of operations or cash flows.

 

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Item 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures. Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Controls. There were no changes in our internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the quarter ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

 

Item 1. LEGAL PROCEEDINGS

We are not currently a party to any material legal proceedings.

 

Item 1A. RISK FACTORS

There have been no material changes to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2014 and Part II – Item 1A Risk Factors in our Quarterly Report on Form 10-Q for the quarters ended March 31, 2015 and June 30, 2015, other than as set forth below:

The holders of our Series A Preferred Stock are entitled to rights and preferences that are significantly greater than the rights and  preferences of the holders of our common stock, including preferential payments upon a liquidation, as well as dividend and registration rights associated with their shares.

On July 14, 2015, we issued an aggregate of 1,474,443 shares of newly designated Series A Preferred Stock, $0.001 par value per share, or Series A Preferred Stock. Holders of our Series A Preferred Stock are entitled to a number of rights and preferences which holders of our outstanding common stock do not and will not have. Among these rights and preferences is a preference on liquidation of the Company, which means that holders of the Series A Preferred Stock will be entitled to receive the proceeds out of any liquidation of the Company before any such proceeds are paid to holders of our common stock. Upon liquidation, including deemed liquidations pursuant to a merger, consolidation or a sale of all or substantially all of our assets, the holders of Series A Preferred Stock will be entitled to be paid first out of any proceeds in the amount of $1.7003 per share, which was the price at which shares of Series A Preferred Stock were sold on July 14, 2015, plus all accrued but unpaid dividends on the shares of Series A Preferred Stock, and prior to payment of any amounts on our common stock. Thereafter, the holders of Series A Preferred Stock will also share pro rata on an as converted to common stock basis in payments made to the holders of our common stock. Accordingly, the holders of the Series A Preferred Stock will be entitled to receive the proceeds out of any sale or liquidation of the Company before any such proceeds are paid to holders of our common stock and then share in any proceeds paid to holders of our common stock. As a result, only the sale or liquidation proceeds in excess of the liquidation preference plus accrued but unpaid dividends would be available for distribution to holders of our common stock.

Holders of our Series A Preferred Stock also have significant rights with respect to certain actions that the Company may wish to take from time to time. At any time prior to the conversion of the Series A Preferred Stock, the consent of the holders of at least a majority of the Series A Preferred Stock then outstanding, voting together as a single class, will be required for the Company to take certain actions, including, among other things: liquidating, dissolving or winding up the business and affairs of the Company or effecting any merger, consolidation or other liquidation event; amending, altering or repealing any provision of the Certificate of Incorporation, the Certificate of Designations of the Series A Preferred Stock or the Bylaws of the Company; creating or authorizing any class or series of capital stock ranking senior to or on parity with the Series A Preferred Stock or increasing the number of authorized shares of Series A Preferred Stock; purchasing, redeeming, paying or declaring dividends on any shares of our capital stock, with certain exceptions; increasing or decreasing the size of our board of directors; and certain other actions. As a result, we will not be able to take any of these actions without first seeking and obtaining the approval of the holders of our Series A Preferred Stock. We may not be able to obtain such approval in a timely manner or at all, even if we think that taking the action for which we seek approval is in the best interests of the Company.

On July 14, 2015, we also entered into the Fifth Amended and Restated Investor Rights Agreement, or the Investor Rights Agreement, with the holders of our Series A Preferred Stock, as well as the stockholders who hold shares of our common stock that are registrable securities our then existing Fourth Amended and Restated Investor Rights Agreement dated as of July 10, 2008. Under the terms of

 

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the Investor Rights Agreement, we granted certain demand and piggyback registration rights with respect to the shares of common stock issuable upon conversion of the Series A Preferred Stock. Sales of a substantial number of shares of our common stock in the public market could occur in the future. These sales, or the perception in the market that the holders of a large number of shares of common stock intend to sell shares, could reduce the market price of our common stock.

The holders of the Series A Preferred Stock represent a significant voting interest in the Company.

Each share of Series A Preferred Stock is convertible into one share of our common stock, at any time at the option of each holder and automatically upon the written consent of the holders of a majority of the outstanding shares of Series A Preferred Stock. Assuming the full conversion of all of the shares of Series A Preferred Stock into our common stock, the holders of the Series A Preferred Stock and their affiliates would represent approximately 28.6% of our issued and outstanding capital stock as of October 31, 2015. Prior to such conversion, holders of Series A Preferred Stock will be entitled to vote with the holders of our common stock on an as-converted basis, except that no holder of Series A Preferred Stock will be entitled to cast votes for the number of shares of common stock issuable upon conversion of the Series A Preferred Stock held by such holder that exceeds (subject to a proportionate adjustment in the event of a stock split, stock dividend, combination or other proportionate recapitalization) the quotient of (A) the aggregate purchase price paid by such holder for its Series A Preferred Stock, divided by (B) the greater of (i) $3.20 and (ii) the closing price of our common stock on the trading day immediately prior to the date our Series A Preferred Stock was issued, which was $1.40. Therefore, as of October 31, 2015, the holders of Series A Preferred Stock and their affiliates held approximately 17.9% of the voting power of the Company.

Our common stock is quoted on the OTCQB, which could result in a limited market for our common stock.

Our common stock had been listed on The NASDAQ Capital Market until September 15, 2015, when it was suspended for failure to comply with The NASDAQ Capital Market continued listing standards. On September 16, 2015, our common stock began trading on the OTC Markets’ OTCQB market tier under the trading symbol “BGMD.” The delisting of our common stock from The NASDAQ Capital Market could substantially further reduce the liquidity of our common stock and result in a corresponding material reduction in the price of our common stock. In addition, the delisting could negatively affect us by reducing the number of investors willing to hold or acquire our common stock, which could negatively affect our ability to raise capital, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities.

In pursuing our commercialization strategy for our BGM Galectin-3 Test for heart failure, we are particularly dependent upon Health Diagnostic Laboratory, Inc., or HDL, which is our largest customer and which filed for bankruptcy in June 2015.

In pursuing our commercialization strategy for our BGM Galectin-3 Test for heart failure, we are particularly dependent upon HDL, which was responsible for approximately 80% of our galectin-3 test sales in 2014 and approximately 68% of the Company’s product revenues for the fiscal quarter ended September 30, 2015. In March 2011, we entered into a supply agreement with HDL pursuant to which HDL agreed to make our microplate galectin-3 test available to physicians in the United States. Under the agreement, we agreed to provide HDL with certain clinical market development resources, programs and assistance as reasonably requested by HDL, and HDL agreed to perform certain sales, marketing and marketing education activities in support of our galectin-3 test. On June 7, 2015, HDL filed a voluntary petition for bankruptcy protection under Chapter 11 in the United States Bankruptcy Court for the Eastern District of Virginia, Richmond Division. Since HDL’s bankruptcy filing, we have received substantially smaller and less frequent orders from HDL than we had received previously. On September 11, 2015, True Health Diagnostics announced the acquisition of HDL, in a court-supervised auction. HDL has not yet filed a plan of liquidation or reorganization. Thus, it is uncertain what distribution will be made on account of allowed claims. Further, the court approved HDL’s request to extend the exclusive deadline by which HDL may file a plan of liquidation or reorganization until early 2016. Accordingly, we have already experienced a substantial downturn in our revenue as a result of HDL’s bankruptcy and we may suffer significant additional lost revenues as a result of HDL’s bankruptcy or any related business interruptions experienced by HDL or if our relationship with HDL is otherwise further adversely affected. Any prolonged disruption in HDL’s operations or problems that otherwise undermine our business relationship with HDL could have a significant negative impact on our ability to execute on our commercialization strategy for our galectin-3 test in the United States and to maintain or increase the sales volume of our galectin-3 test.

 

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities

Not applicable.

Issuer Purchases of Equity Securities

We did not repurchase any of our equity securities during the quarter ended September 30, 2015.

 

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Item 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

 

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

 

Item 5. OTHER INFORMATION

Not applicable.

 

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Item 6. EXHIBITS

 

Exhibit

Number

  

Exhibit Description

  

Filed

with

this

Report

  

Incorporated

by

Reference

herein

from Form

or

Schedule

 

Filing

Date

  

SEC File/

Reg. Number

    3.1.1    Restated Certificate of Incorporation of BG Medicine, Inc.       Form 8-K

(Exhibit 3.1)

  2/11/11    001-33827
    3.1.2    Certificate of Amendment to Restated Certificate of Incorporation of BG Medicine, Inc., dated July 8, 2015.       Form 8-K

(Exhibit 3.1)

  7/8/15    001-33827
    3.1.3    Amended and Restated Certificate of Designations of Series A Preferred Stock of BG Medicine, Inc. filed with the Secretary of State of the State of Delaware on August 18, 2015.       Form 8-K

(Exhibit 3.1)

  8/18/15    001-33827
    4.1    Form of Prefunded Common Stock Purchase Warrant issued to the purchasers in the 2015 public offering.       Form 8-K

(Exhibit 4.1)

  8/18/15    001-33827
    4.2    Form of Common Stock Purchase Warrant issued to the purchasers in the 2015 public offering.       Form 8-K

(Exhibit 4.2)

  8/18/15    001-33827
  10.1    First Amendment to Securities Purchase Agreement by and between BG Medicine, Inc. and the purchasers named therein, dated July 14, 2015       Form 8-K

(Exhibit 10.1)

  7/15/15    001-33827
  10.2    Fifth Amended and Restated Investor Rights Agreement by and between BG Medicine, Inc. and the stockholders named therein, dated July 14, 2015.       Form 8-K

(Exhibit 10.2)

  7/15/15    001-33827
  31.1    Certification of the Registrant’s Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    X        
  31.2    Certification of the Registrant’s Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    X        
  32    Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.    X        
101    The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, formatted in XBRL (eXtensible Business Reporting Language): (i) Unaudited Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014, (ii) Unaudited Condensed Consolidated Statements of Operations for the three and nine month periods ended September 30, 2015 and 2014, (iii) Unaudited Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2015 and 2014, and (iv) Notes to Unaudited Condensed Consolidated Financial Statements.    X        

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

      BG MEDICINE, INC.
Date:   November 16, 2015     By:  

/s/ Paul R. Sohmer

        Paul R. Sohmer, M.D.
        President and Chief Executive Officer
Date:   November 16, 2015     By:  

/s/ Stephen P. Hall

        Stephen P. Hall
        Executive Vice President, Chief Financial Officer and Treasurer

 

31

EX-31.1 2 d14311dex311.htm EX-31.1 EX-31.1

Exhibit 31.1

CERTIFICATIONS UNDER SECTION 302

I, Paul R. Sohmer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of BG Medicine, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 16, 2015

 

/s/ Paul R. Sohmer

Paul R. Sohmer, M.D.
President and Chief Executive Officer
(principal executive officer)
EX-31.2 3 d14311dex312.htm EX-31.2 EX-31.2

Exhibit 31.2

CERTIFICATIONS UNDER SECTION 302

I, Stephen P. Hall, certify that:

1. I have reviewed this quarterly report on Form 10-Q of BG Medicine, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 16, 2015

 

/s/ Stephen P. Hall

Stephen P. Hall

Executive Vice President, Chief Financial Officer

and Treasurer

(principal financial officer)

EX-32 4 d14311dex32.htm EX-32 EX-32

Exhibit 32

CERTIFICATIONS UNDER SECTION 906

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of BG Medicine, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report for the quarter ended September 30, 2015 (the “Form 10-Q”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated:   November 16, 2015    

/s/ Paul R. Sohmer

      Paul R. Sohmer, M.D.
      President and Chief Executive Officer
      (principal executive officer)
Dated:   November 16, 2015    

/s/ Stephen P. Hall

      Stephen P. Hall
      Executive Vice President, Chief Financial Officer and Treasurer
      (principal financial officer)
EX-101.INS 5 bgmd-20150930.xml XBRL INSTANCE DOCUMENT 10000000 2.12 2.68 79000 0.001 2000000 2000000 2000000 500000 1474443 1.00 1 1 0.5 0.5 1.00 1.00 11126579 6.20 1.54 0 3.33 1176262 1.7003 1176262 6313000 2.36 2.14 2.00 2.68 31000 2.68 929000 1474443 0.001 100000000 11126579 1474443 0.001 11126579 5000000 1942000 562000 0 2036000 11000 164118000 151000 94000 -165403000 -1274000 2548000 3356000 1500000 2594000 1332000 48000 92000 178000 14000 3156000 45000 3356000 2642000 94000 139000 152000 223000 2400000 1.00 1.40 2000000 2000000 3.20 0 7751000 0 0.001 100000000 8632810 0 0.001 8632810 0 4579000 906000 2960000 4672000 9000 161550000 0 93000 -161002000 557000 5229000 695000 18000 135000 336000 117000 4851000 64000 5229000 4123000 126000 154000 174000 400000 0.0002 0.00 P2M19D 0.738 2000000 0.0999 184346 2315654 1613000 10000000 9000000 0.25 On July 8, 2015, the Company effected a 1-for-4 reverse stock split of its common stock. All previously reported common stock share amounts in the accompanying financial statements and related notes have been retroactively adjusted to reflect the reverse stock split. 0.562 P0Y 0.180 298181 2000000 500000 277000 -7097000 -0.84 8028373 -6744000 2000 -6151000 -101000 2233000 -65000 2000 3360000 2158000 433000 -78000 -6744000 75000 597000 9238000 2069000 5659000 100000 164000 3696000 2000 -1349000 8384000 764000 -1438000 489000 -1000 22000 1855000 2233000 2233000 243000 644789 216156 10-Q BGMD 0001407038 2015-09-30 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 12pt"> The following table summarizes the computation of basic and diluted net loss per share for the three and nine months ended September&#xA0;30, 2015 and 2014:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="80%"></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"> <b>Three&#xA0;Months&#xA0;Ended&#xA0;September&#xA0;30,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"> <b>Nine&#xA0;Months&#xA0;Ended&#xA0;September&#xA0;30,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="14" align="center"> <b>(in&#xA0;thousands,&#xA0;except&#xA0;share&#xA0;and&#xA0;per&#xA0;share&#xA0;data)</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Net loss</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(1,023</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2,397</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(4,401</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(6,744</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Preferred stock dividend</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(41</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(41</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Deemed dividend on beneficial conversion feature</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(1,507</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(1,507</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Accretion of convertible preferred stock to liquidation value</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(56</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(56</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Net loss attributable to common shareholders</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2,627</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2,397</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(6,005</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(6,744</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Weighted average number of shares - basic and diluted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">9,862,802</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">8,604,312</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">9,057,960</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">8,028,373</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Net loss per share attributable to common shareholders - basic and diluted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.27</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.28</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.66</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.84</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> </table> </div> Smaller Reporting Company --12-31 Q3 <div> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Net Loss Per Share Attributable to Common Shareholders</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Basic and diluted net loss per share attributable to common shareholders is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. The Company applied the two-class method to calculate its basic and diluted net loss per share of common stock, as its convertible preferred stock, common stock, and warrants to purchase common stock are participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common shareholders. However, the two-class method does not impact the net loss per share of common stock as the Company was in a loss position for each of the periods presented, and neither preferred shareholders nor warrant holders participate in losses.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The following table summarizes the computation of basic and diluted net loss per share for the three and nine months ended September&#xA0;30, 2015 and 2014:</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="80%"></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center"> <b>Three&#xA0;Months&#xA0;Ended&#xA0;September&#xA0;30,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center"> <b>Nine&#xA0;Months&#xA0;Ended&#xA0;September&#xA0;30,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="14" align="center"> <b>(in&#xA0;thousands,&#xA0;except&#xA0;share&#xA0;and&#xA0;per&#xA0;share&#xA0;data)</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Net loss</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(1,023</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2,397</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(4,401</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(6,744</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Preferred stock dividend</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(41</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(41</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Deemed dividend on beneficial conversion feature</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(1,507</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(1,507</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Accretion of convertible preferred stock to liquidation value</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(56</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(56</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Net loss attributable to common shareholders</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2,627</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2,397</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(6,005</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(6,744</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Weighted average number of shares - basic and diluted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">9,862,802</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">8,604,312</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">9,057,960</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">8,028,373</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Net loss per share attributable to common shareholders - basic and diluted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.27</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.28</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.66</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.84</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> As of September&#xA0;30, 2015 and 2014, the following potential common shares were excluded from the computation of diluted net loss per share because they had an antidilutive impact due to the losses reported:</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <table style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="92%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center"><b>September&#xA0;30,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Options to purchase common stock</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">699,513</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">644,789</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Warrants to purchase common stock</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,536,929</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">216,156</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> </table> <br class="Apple-interchange-newline" /></div> <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left"><b>3.</b></td> <td valign="top" align="left"><b>Fair Value of Financial Instruments</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> At September&#xA0;30, 2015, the Company&#x2019;s financial instruments consisted of cash, accounts receivable, and accounts payable. The carrying amounts of accounts receivable and accounts payable are considered reasonable estimates of their fair value, due to the short maturity of these instruments.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> In accordance with U.S. generally accepted accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Level 1&#x2014;Quoted prices in active markets for identical assets or liabilities.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Level 2&#x2014;Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Level 3&#x2014;Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The assets or liabilities fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The table below sets forth a summary of changes in the fair value of the Company&#x2019;s level 3 liability (preferred stock liability) for the three and nine months ending September 30, 2015:</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="62%"></td> <td valign="bottom" width="16%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="16%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Three&#xA0;Months&#xA0;Ended<br /> September 30, 2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Nine&#xA0;Months&#xA0;Ended<br /> September 30, 2015</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"><b>(in thousands)</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Beginning balance</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">31</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Loss on recognition of preferred stock liability</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">79</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Gain on revaluation of preferred stock liability</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(31</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(79</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Ending balance</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The resulting initial recognition and subsequent revaluation were recorded as other income (expense) in the unaudited condensed consolidated statements of operations</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The table below sets forth a summary of changes in the fair value of the Company&#x2019;s secured convertible notes for the three and nine months ended September 30, 2015:</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="62%"></td> <td valign="bottom" width="16%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="16%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Three&#xA0;Months&#xA0;Ended<br /> September 30, 2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Nine&#xA0;Months&#xA0;Ended<br /> September 30, 2015</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"><b>(in thousands)</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Beginning balance</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">929</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Proceeds from secured convertible note</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">500</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Loss on fair value adjustment</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">58</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">487</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Conversion of secured convertible notes</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(987</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(987</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Ending balance</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The resulting fair value adjustment was recorded as other income (expense) in the unaudited condensed consolidated statements of operations.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The preferred stock liability was valued using the Black-Scholes option pricing model as of May 12, 2015, the issuance date of the secured convertible note, resulting in a fair value of $79,000. This valuation considered an underlying security price of $2.12, strike price of $2.68, risk-free interest rate of 0.02%, expected dividend yield of 0%, volatility factor of 73.8%, and expected term of 0.22 years. The preferred stock liability was revalued as of June 30, 2015 resulting in a fair value of $31,000. This valuation considered an underlying security price of $2.00, strike price of $2.68, risk-free interest rate of 0.03%, expected dividend yield of 0%, volatility factor of 73.8%, and expected term of 0.08 years. As of July 14, 2015, the mandatory conversion of the preferred stock occurred, resulting in a remaining term of zero and thereby a fair value of zero.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The secured convertible promissory notes valuation analysis was based on the probability-weighted expected return method (&#x201C;PWERM&#x201D;) utilizing various scenarios for the expected payout of the instrument covering the full range of the potential outcomes. The PWERM determines the value of an instrument, based upon an analysis of future values for the subject instruments, which takes into consideration the full range of the potential cash flows available to the subject instrument. The instrument value is based upon the present value of the probability of each future outcome becoming available to the instrument, and the economic rights and preferences of the instrument.</p> <p style="MARGIN-BOTTOM: 0px; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 1px 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 6px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Due to the lack of relevant and market reflective Level 1 and Level 2 inputs, the Company valued the instruments using Level 3 inputs, which require significant judgment and estimates on behalf of management in developing model assumptions. The fair value model used in valuing the convertible debt instrument as of June 30, 2015 utilized the following inputs: conversion price per share, current and future stock prices, discount rate, and volatility. The following assumptions were made in the model: (1) conversion price of $2.68 per share, (2) current common stock price of $2.36 per share, (3) simulated future common stock price of $2.14 per share, (4) discount rate of 18.0%, (5) expected stock price volatility related to the current common stock price of 51.0%, and (6) expected stock price volatility related to the simulated future common stock price of 55.0%. At the conversion date of July 14, 2015, the following inputs were utilized in valuing the convertible debt instrument: (1) conversion price of $3.33 per share, (2) current common stock price of $1.54 per share, (3) discount rate of 18.0%, and (4) expected stock price volatility of 56.2%.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> <b>Product Revenues</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Product revenues are recognized when the following criteria have been met: (i)&#xA0;persuasive evidence of an arrangement exists; (ii)&#xA0;delivery has occurred and risk of loss has passed; (iii)&#xA0;the seller&#x2019;s price to the buyer is fixed or determinable; and (iv)&#xA0;collectability is reasonably assured.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The Company sells its products through supply agreements with laboratory testing services and diagnostic testing distributors and directly to hospitals and clinics. The Company recognizes revenue when products are received by customers, at which time both title and risk of loss have passed to the customers. The Company negotiates credit terms on a customer-by-customer basis and products are shipped at an agreed-upon price.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. Freight costs billed to customers are recorded as revenue.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> In the past the Company did not provide an allowance for doubtful accounts or a reserve for sales returns as the Company has not experienced any credit losses, and returns are only allowed for defects in workmanship. On June&#xA0;7, 2015, Health Diagnostic Laboratory, Inc. (&#x201C;HDL&#x201D;), which is the Company&#x2019;s largest customer of its BGM Galectin-3 <sup style="FONT-SIZE: 85%; VERTICAL-ALIGN: top">&#xAE;</sup> Test, filed a voluntary petition for bankruptcy protection under Chapter 11 in the United States Bankruptcy Court for the Eastern District of Virginia, Richmond Division. In light of this filing the Company provided a provision for doubtful accounts of $151,000 in the second quarter of 2015. On September&#xA0;11, 2015, True Health Diagnostics announced the acquisition of HDL, in a court-supervised auction has not yet filed a plan of liquidation or reorganization. Thus, it is uncertain what distribution will be made on account of allowed claims. Further, the court approved HDL&#x2019;s request to extend the exclusive deadline by which HDL may file a plan of liquidation or reorganization until early 2016.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 18pt"> <b>Product Fee Revenues</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The Company recognizes product fee revenue when it receives quarterly test sales reporting and payments thereunder from its partners. The Company has entered into worldwide license, development and commercialization agreements with Abbott Laboratories, (&#x201C;Abbott&#x201D;), bioM&#xE9;rieux SA, (&#x201C;bioM&#xE9;rieux&#x201D;), Siemens Healthcare Diagnostics Inc., (&#x201C;Siemens&#x201D;), and Alere Inc., (&#x201C;Alere&#x201D;). As consideration for the rights and licenses granted by the Company to its partners, the licensees pay to the Company a product fee, as set forth in the respective agreements, for tests sold to third parties. To date, only Abbott and bioM&#xE9;rieux have paid product fees to the Company.</p> <p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 18px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 0pt"> <b>Product Fee Reclassification</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Beginning in the third quarter of 2015, the Company began disclosing product fee revenue separately from product revenue. To maintain comparability, all previously reported product revenue figures in the accompanying unaudited condensed consolidated financial statements have been retroactively adjusted to break out the product fee revenue recognized during those periods. Management evaluated the amount and nature of the change and concluded that it was not material to either the previously reported annual or quarterly financial statement results of operations.&#xA0;Nonetheless, the Company has reclassified the historical statement of operations amounts included in this filing as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="80%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>As reported</b><br /> <b>Three&#xA0;months&#xA0;ended</b><br /> <b>September&#xA0;30,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>As&#xA0;reclassified</b><br /> <b>Three&#xA0;months&#xA0;ended</b><br /> <b>September&#xA0;30,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>As reported</b><br /> <b>Nine&#xA0;months&#xA0;ended</b><br /> <b>September&#xA0;30,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>As&#xA0;reclassified</b><br /> <b>Nine&#xA0;months&#xA0;ended</b><br /> <b>September&#xA0;30,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> <b>Product Revenues</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">695</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">669</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,233</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,158</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> <b>Product Fee Revenues</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">26</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">75</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> <b>Total Revenues</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">695</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">695</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,233</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,233</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> -2550000 false -0.66 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left"><b>1.</b></td> <td valign="top" align="left"><b>Description of Business and Basis of Presentation</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Description of Business</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> BG Medicine, Inc. (&#x201C;BG Medicine&#x201D; or the &#x201C;Company&#x201D;) is a commercial stage company that is focused on the development and delivery of diagnostic solutions to aid in the clinical management of heart failure and related disorders.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Company&#x2019;s BGM Galectin-3<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;Test is an&#xA0;<i>in vitro&#xA0;</i>diagnostic device that employs a manual micro-titer platform to quantitatively measure galectin-3 levels in blood plasma or serum for use as an aid in assessing the prognosis of chronic heart failure in conjunction with clinical evaluation. The BGM Galectin-3<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;Test is cleared by the U.S. Food and Drug Administration (the &#x201C;FDA&#x201D;), is CE-marked and is currently available as a blood test in the United States and the European Union (&#x201C;EU&#x201D;).</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Company has entered into licensing agreements with leading diagnostic instrument manufacturers to develop and commercialize galectin-3 assays that will be performed on automated platforms that have been incorporated into routine practice in laboratories throughout the world. On December&#xA0;23, 2014, the FDA granted 510(k) clearance for the ARCHITECT&#xA0;<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;Galectin-3 assay, the first FDA cleared automated blood test for Galectin-3, as an aid in assessing the prognosis of patients diagnosed with chronic heart failure in conjunction with clinical evaluation. On July&#xA0;6, 2015, the Company announced that the ARCHITECT&#xA0;<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;Galectin-3 assay is now available in the United States. This is the first automated test for galectin-3 to be introduced for commercial use in the United States. The ARCHITECT&#xA0;<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;Galectin-3 assay is performed using the Abbott ARCHITECT&#xA0;<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;automated immunoassay analyzer and is being commercialized through an agreement between the Company and Abbott.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Basis of Presentation</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States and in accordance with the rules and regulations of the Securities and Exchange Commission (&#x201C;SEC&#x201D;) for interim financial information.&#xA0;Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements.&#xA0;The interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company&#x2019;s financial position at September&#xA0;30, 2015 and results of operations and cash flows for the interim periods ended September&#xA0;30, 2015 and 2014.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> On July&#xA0;8, 2015, the Company effected a 1-for-4 reverse stock split of its common stock. All previously reported common stock share amounts in the accompanying financial statements and related notes have been retroactively adjusted to reflect the reverse stock split. As a result of the reverse stock split, the stated capital on the Company&#x2019;s balance sheet attributable to its common stock, which consists of the par value per share of its common stock multiplied by the aggregate number of shares of its common stock issued and outstanding, has been reduced in proportion to the size of the reverse stock split. Correspondingly, the Company&#x2019;s additional paid-in capital account, which consists of the difference between its stated capital and the aggregate amount paid to the Company upon issuance of all currently outstanding shares of its common stock, has been credited with the amount by which the stated capital is reduced.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates and to identify matters that require additional disclosure. Subsequent events have been evaluated through the date of issuance of these financial statements. The results for the nine months ended September&#xA0;30, 2015 are not necessarily indicative of the results to be expected for the year ending December&#xA0;31, 2015 or for any other interim period or for any other future year. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company&#x2019;s Annual Report on Form&#xA0;10-K for the year ended December&#xA0;31, 2014.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> At September&#xA0;30, 2015, the Company had cash totaling $2.6 million, an outstanding balance of $0 under its secured term loan facility, which the Company repaid and which was terminated in July 2015, and stockholders&#x2019; deficit of $1.3 million. During the nine months ended September&#xA0;30, 2015, the Company incurred a net loss of $4.4 million, used $2.6 million of cash in operating activities and used $3.0 million of cash for payments to extinguish the term loan facility. The Company expects to continue to incur losses and use cash in operating activities for the foreseeable future.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Company is in the early stages of commercializing its BGM Galectin-3 Test and assisting with the commercialization of the ARCHITECT&#xAE; Galectin-3 assay. Interest in the testing for galectin-3 is increasing as a result of the Company&#x2019;s market development activities, although it has not yet translated into significant revenue. In order to achieve profitability, the Company will need to generate significant product revenues.</p> <p style="MARGIN-BOTTOM: 0px; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 1px 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 6px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Effective January&#xA0;1, 2014, the payment rate at which testing for galectin-3 is reimbursed by the Centers for Medicare and Medicaid Services (&#x201C;CMS&#x201D;), was increased to $30.01 from $17.80 per test. In 2015, the national limitation amount for testing for galectin-3 was reduced to $29.93 and applies across the U.S., except in Ohio and West Virginia where rates of $23.93 and $26.33, respectively, apply.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Since September&#xA0;11, 2014, the Company has implemented a reduction of approximately 77% of its workforce, or 17 people (the &#x201C;Restructuring&#x201D;), leaving 5 employees. The Company took this step in order to reduce its operating expenses and extend its cash runway in anticipation of the commercial launch of automated versions of the Company&#x2019;s galectin-3 test. The automated galectin-3 tests are being developed and commercialized by the Company&#x2019;s diagnostic instrument manufacturing partners and will be performed on the partners&#x2019; automated platforms.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Restructuring primarily eliminated the Company&#x2019;s sales and marketing organization and removed certain positions in other functional areas, while preserving some senior management and other critical roles to support the clinical and commercial adoption of galectin-3 testing by providing support to the marketing and selling efforts of its automated partners, clinical research studies that have incorporated galectin-3 testing and by expanding the BGM Galectin-3 Test&#x2019;s labeling indications for use through additional clinical studies and clearances by the FDA.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Employees affected by the Restructuring were provided with severance arrangements including outplacement assistance. As a result of the Restructuring, the Company has recorded total charges with respect to severance payments and benefits continuation of approximately $404,000 and $98,000 during 2014 and 2015, respectively. Of the total $404,000 charges in 2014, $128,000 was recorded in research and development, $114,000 was recorded in sales and marketing, and $162,000 was recorded in general and administrative expense. Of the $98,000 charges in 2015, $41,000 was recorded in research and development and $57,000 was recorded in sales and marketing expense. The Company paid approximately $277,000 of such expenses during the third and fourth quarters of 2014 and $225,000 during the first three quarters of 2015. As a result of the Restructuring, the Company estimates it will generate annualized expense savings of approximately $2.4&#xA0;million primarily from savings in employee salaries and benefits.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> In May&#xA0;2015, the Company entered into a Securities Purchase Agreement (the &#x201C;Purchase Agreement&#x201D;) with the Company&#x2019;s principal stockholders, Pursuant to the terms and subject to the conditions contained in the Purchase Agreement, the Company issued and sold to the purchasers (the &#x201C;Purchasers&#x201D;) secured convertible promissory notes in an aggregate principal amount of $500,000. In addition and pursuant to the terms of the Purchase Agreement, and as approved by the Company&#x2019;s stockholders at the Company&#x2019;s 2015 annual meeting of stockholders (the &#x201C;2015 Annual Meeting&#x201D;) and the satisfaction or waiver of other closing conditions, the Company issued and sold to the purchasers $2,000,000 of shares of newly created Series A Preferred Stock, $0.001 par value per share of the Company at the second closing that was held on July&#xA0;14, 2015 following the Company&#x2019;s 2015 Annual Meeting.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> In June 2015, the Company entered into a sublease agreement with a third party for the 880 Winter Street office space. The term of the sublease is from June&#xA0;1, 2015 through December&#xA0;31, 2018 covering the balance of the underlying lease term. The Company has recorded in operating costs total charges of $153,000 with respect to the net present value of the net costs that will continue to be incurred under the lease for its remaining term and the real estate brokerage commissions on the sublease. The Company has obtained office space on a short term rental basis and expects to generate annualized savings of approximately $240,000.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> As further described in Note 4, the Company had a term loan facility that was secured by substantially all of the Company&#x2019;s assets. On July&#xA0;14, 2015 the Company paid off all of its outstanding obligations under the term loan.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> In August 2015, the Company closed on an underwritten public offering of (i)&#xA0;2,315,654 Series A units, each consisting of one share of common stock and one half of a warrant to purchase one share of common stock, at a purchase price of $1.00 per Series A unit, and (ii)&#xA0;184,346 Series B units, in lieu of Series A units, at a purchase price of $1.00 per Series B unit to those purchasers whose purchase of additional Series A units in the offering would result in the purchaser beneficially owning more than 9.99% of the Company&#x2019;s outstanding common stock following the completion of the offering. Each Series B unit consists of one fully pre-funded warrant to purchase one share of common stock and one half of a warrant to purchase one share of common stock. The warrants (other than the fully pre-funded warrants) have an exercise price of $1.00 per share. The net offering proceeds received by the Company, after deducting discounts and commissions and expenses incurred with the offering were approximately $2.0 million.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Company&#x2019;s common stock had been listed for trading on The NASDAQ Capital Market until September&#xA0;15, 2015, when it was suspended for failure to comply with The NASDAQ Capital Market continued listing standards. On September&#xA0;16, 2015, the Company&#x2019;s common stock began trading on the OTC Markets&#x2019; OTCQB market tier under the trading symbol &#x201C;BGMD.&#x201D; The delisting of the Company&#x2019;s common stock from The NASDAQ Capital Market could substantially further reduce the liquidity of the Company&#x2019;s common stock and result in a corresponding material reduction in the price of the Company&#x2019;s common stock. In addition, the delisting could negatively affect the Company by reducing the number of investors willing to hold or acquire the Company&#x2019;s common stock, which could negatively affect the Company&#x2019;s ability to raise capital, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Company believes that its existing cash will be sufficient to fund its operations into July 2016. For the foreseeable future and until the Company generates significant product revenues to reach cash breakeven, the Company will need to raise additional funds to finance its operations beyond July 2016. The Company may not be able to obtain adequate financing to do so when necessary, and the terms of any financings may not be advantageous to the Company and any financings may result in dilution to the Company&#x2019;s stockholders.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The above circumstances along with the Company&#x2019;s history, the near term forecast of incurring net losses and negative operating cash flows, the Company&#x2019;s dependence on near-term revenues generated from product fees due from a single automated partner, the Company&#x2019;s limited experience with the amount and timing of sales made by its automated partners and its inability to predict the timing of the market introduction of automated tests and product fees generated by the sale of automated tests by its other automated partners raise substantial doubt regarding the Company&#x2019;s ability to continue as a going concern for a reasonable period of time. The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability to continue as a going concern.</p> </div> BG MEDICINE, INC. <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left"><b>2.</b></td> <td valign="top" align="left"><b>Significant Accounting Policies</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Product Revenues</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Product revenues are recognized when the following criteria have been met: (i)&#xA0;persuasive evidence of an arrangement exists; (ii)&#xA0;delivery has occurred and risk of loss has passed; (iii)&#xA0;the seller&#x2019;s price to the buyer is fixed or determinable; and (iv)&#xA0;collectability is reasonably assured.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Company sells its products through supply agreements with laboratory testing services and diagnostic testing distributors and directly to hospitals and clinics. The Company recognizes revenue when products are received by customers, at which time both title and risk of loss have passed to the customers. The Company negotiates credit terms on a customer-by-customer basis and products are shipped at an agreed-upon price.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. Freight costs billed to customers are recorded as revenue.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> In the past the Company did not provide an allowance for doubtful accounts or a reserve for sales returns as the Company has not experienced any credit losses, and returns are only allowed for defects in workmanship. On June&#xA0;7, 2015, Health Diagnostic Laboratory, Inc. (&#x201C;HDL&#x201D;), which is the Company&#x2019;s largest customer of its BGM Galectin-3&#xA0;<sup style="FONT-SIZE: 11px; VERTICAL-ALIGN: top">&#xAE;</sup>&#xA0;Test, filed a voluntary petition for bankruptcy protection under Chapter 11 in the United States Bankruptcy Court for the Eastern District of Virginia, Richmond Division. In light of this filing the Company provided a provision for doubtful accounts of $151,000 in the second quarter of 2015. On September&#xA0;11, 2015, True Health Diagnostics announced the acquisition of HDL, in a court-supervised auction has not yet filed a plan of liquidation or reorganization. Thus, it is uncertain what distribution will be made on account of allowed claims. Further, the court approved HDL&#x2019;s request to extend the exclusive deadline by which HDL may file a plan of liquidation or reorganization until early 2016.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Product Fee Revenues</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Company recognizes product fee revenue when it receives quarterly test sales reporting and payments thereunder from its partners. The Company has entered into worldwide license, development and commercialization agreements with Abbott Laboratories, (&#x201C;Abbott&#x201D;), bioM&#xE9;rieux SA, (&#x201C;bioM&#xE9;rieux&#x201D;), Siemens Healthcare Diagnostics Inc., (&#x201C;Siemens&#x201D;), and Alere Inc., (&#x201C;Alere&#x201D;). As consideration for the rights and licenses granted by the Company to its partners, the licensees pay to the Company a product fee, as set forth in the respective agreements, for tests sold to third parties. To date, only Abbott and bioM&#xE9;rieux have paid product fees to the Company.</p> <p style="MARGIN-BOTTOM: 0px; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 1px 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 18px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Product Fee Reclassification</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Beginning in the third quarter of 2015, the Company began disclosing product fee revenue separately from product revenue. To maintain comparability, all previously reported product revenue figures in the accompanying unaudited condensed consolidated financial statements have been retroactively adjusted to break out the product fee revenue recognized during those periods. Management evaluated the amount and nature of the change and concluded that it was not material to either the previously reported annual or quarterly financial statement results of operations.&#xA0;Nonetheless, the Company has reclassified the historical statement of operations amounts included in this filing as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="80%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>As reported</b><br /> <b>Three&#xA0;months&#xA0;ended</b><br /> <b>September&#xA0;30,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>As&#xA0;reclassified</b><br /> <b>Three&#xA0;months&#xA0;ended</b><br /> <b>September&#xA0;30,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>As reported</b><br /> <b>Nine&#xA0;months&#xA0;ended</b><br /> <b>September&#xA0;30,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>As&#xA0;reclassified</b><br /> <b>Nine&#xA0;months&#xA0;ended</b><br /> <b>September&#xA0;30,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> <b>Product Revenues</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">695</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">669</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,233</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,158</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> <b>Product Fee Revenues</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">26</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">75</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> <b>Total Revenues</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">695</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">695</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,233</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,233</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Inventory</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Inventory is stated at the lower of cost or market.&#xA0;Costs are determined under the first-in, first-out (FIFO) method. Inventories consisted of the following:</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="88%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom"><b>(in thousands)</b></td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>September&#xA0;30,&#xA0;2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>December&#xA0;31,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Raw materials</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">45</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">64</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Finished goods</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">178</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">336</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 3em; TEXT-INDENT: -1em"> Total inventories</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">223</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">400</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Net Loss Per Share Attributable to Common Shareholders</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Basic and diluted net loss per share attributable to common shareholders is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. The Company applied the two-class method to calculate its basic and diluted net loss per share of common stock, as its convertible preferred stock, common stock, and warrants to purchase common stock are participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common shareholders. However, the two-class method does not impact the net loss per share of common stock as the Company was in a loss position for each of the periods presented, and neither preferred shareholders nor warrant holders participate in losses.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 12pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The following table summarizes the computation of basic and diluted net loss per share for the three and nine months ended September&#xA0;30, 2015 and 2014:</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="80%"></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="2%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center"> <b>Three&#xA0;Months&#xA0;Ended&#xA0;September&#xA0;30,</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center"> <b>Nine&#xA0;Months&#xA0;Ended&#xA0;September&#xA0;30,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="14" align="center"> <b>(in&#xA0;thousands,&#xA0;except&#xA0;share&#xA0;and&#xA0;per&#xA0;share&#xA0;data)</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Net loss</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(1,023</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2,397</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(4,401</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(6,744</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Preferred stock dividend</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(41</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(41</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Deemed dividend on beneficial conversion feature</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(1,507</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(1,507</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Accretion of convertible preferred stock to liquidation value</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(56</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(56</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Net loss attributable to common shareholders</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2,627</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(2,397</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(6,005</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(6,744</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Weighted average number of shares - basic and diluted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">9,862,802</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">8,604,312</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">9,057,960</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">8,028,373</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Net loss per share attributable to common shareholders - basic and diluted</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.27</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.28</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.66</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">(0.84</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> As of September&#xA0;30, 2015 and 2014, the following potential common shares were excluded from the computation of diluted net loss per share because they had an antidilutive impact due to the losses reported:</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <table style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="92%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center"><b>September&#xA0;30,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Options to purchase common stock</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">699,513</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">644,789</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Warrants to purchase common stock</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,536,929</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">216,156</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0px; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 1px 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 18px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Nonetheless, the Company has reclassified the historical statement of operations amounts included in this filing as follows (in thousands):</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0"> <tr> <td width="80%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>As reported</b><br /> <b>Three&#xA0;months&#xA0;ended</b><br /> <b>September&#xA0;30,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>As&#xA0;reclassified</b><br /> <b>Three&#xA0;months&#xA0;ended</b><br /> <b>September&#xA0;30,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>As reported</b><br /> <b>Nine&#xA0;months&#xA0;ended</b><br /> <b>September&#xA0;30,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>As&#xA0;reclassified</b><br /> <b>Nine&#xA0;months&#xA0;ended</b><br /> <b>September&#xA0;30,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> <b>Product Revenues</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">695</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">669</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,233</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,158</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> <b>Product Fee Revenues</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">26</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">75</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> <b>Total Revenues</b></p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">695</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">695</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,233</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">2,233</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> 9057960 2015 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left"><b>5.</b></td> <td valign="top" align="left"><b>Commitments and Contingencies</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> From time to time, the Company may be subject to various legal proceedings and claims arising in the ordinary course of business.&#xA0;The Company assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its financial statements.&#xA0;An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> No amounts related to contingencies are accrued at September&#xA0;30, 2015, as there are no ongoing proceedings.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> As of September&#xA0;30, 2015 and 2014, the following potential common shares were excluded from the computation of diluted net loss per share because they had an antidilutive impact due to the losses reported:</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 12pt 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <table style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="92%"></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="3%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center"><b>September&#xA0;30,</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: 'Times New Roman'"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Options to purchase common stock</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">699,513</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">644,789</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Warrants to purchase common stock</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">1,536,929</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">216,156</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> </table> <p style="MARGIN-BOTTOM: 0px; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 1px 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 18px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> </div> <div> <table style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" border="0" cellpadding="0" cellspacing="0" width="100%"> <tr> <td width="4%" valign="top" align="left"><b>4.</b></td> <td align="left" valign="top"><b>Term Loan</b></td> </tr> </table> <p style="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"> On February&#xA0;10, 2012, the Company entered into a secured term loan facility, and a term loan in the aggregate principal amount of $10.0 million was funded upon the closing of the transaction. On July&#xA0;14, 2015, the Company paid off all of its outstanding obligations under that certain Loan and Security Agreement by and among the Company, General Electric Capital Corporation (&#x201C;GECC&#x201D;) as agent and the lenders and the guarantors thereto dated as of February&#xA0;10, 2012, as amended (the &#x201C;GECC Agreement&#x201D;), and terminated the GECC Agreement. The security interest granted by the Company to GECC in its assets in connection with the GECC Agreement was also terminated at the time of the payoff. Notwithstanding the payoff, the warrants to purchase the Company&#x2019;s common stock that the Company previously issued to GECC&#x2019;s affiliate, GE Capital Equity Investments, Inc., and Comerica Bank in connection with the GECC Agreement, continue to remain outstanding in accordance with their terms and are not affected by the payoff.</p> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 18pt"> <b>Inventory</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Inventory is stated at the lower of cost or market.&#xA0;Costs are determined under the first-in, first-out (FIFO) method. Inventories consisted of the following:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="88%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom"><b>(in thousands)</b></td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September&#xA0;30,&#xA0;2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December&#xA0;31,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Raw materials</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">45</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">64</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Finished goods</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">178</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">336</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; TEXT-INDENT: -1em"> Total inventories</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">223</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">400</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 18pt"> <b>Inventory</b></p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> Inventory is stated at the lower of cost or market.&#xA0;Costs are determined under the first-in, first-out (FIFO) method. Inventories consisted of the following:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"> <tr> <td width="88%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom"><b>(in thousands)</b></td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>September&#xA0;30,&#xA0;2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December&#xA0;31,&#xA0;2014</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Raw materials</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">45</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">64</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Finished goods</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">178</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">336</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 1pt"> <td height="8"></td> <td height="8" colspan="4"></td> <td height="8" colspan="4"></td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; TEXT-INDENT: -1em"> Total inventories</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">223</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">400</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: #000000 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> </table> </div> 987000 -6005000 -514000 -3728000 -177000 1276000 130000 2984000 1160000 81000 -7000 -4401000 116000 -64000 159000 2500000 289000 1507000 1056000 98000 69000 79000 2000000 2978000 151000 13000 254000 500000 56000 41000 5004000 423000 -1481000 7000 630000 63000 13000 1314000 <div> <table style="BORDER-COLLAPSE:COLLAPSE; font-family:Times New Roman; font-size:10pt" border="0" cellpadding="0" cellspacing="0" width="100%"> <tr> <td width="4%" valign="top" align="left"><b>6.</b></td> <td align="left" valign="top"><b>Follow-on Public Offerings</b></td> </tr> </table> <p style="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"> On April&#xA0;8, 2014, the Company closed a follow-on underwritten public offering of 1,613,000 shares of its common stock, at an offering price of $6.20 per share, for gross proceeds of $10.0 million. The net offering proceeds received by the Company, after deducting underwriting discounts and commissions and expenses incurred in connection with the offering, were approximately $9.0 million.</p> <p style="margin-top:6pt; margin-bottom:0pt; margin-left:4%; font-size:10pt; font-family:Times New Roman"> On August&#xA0;18, 2015, the Company closed on an underwritten public offering of (i)&#xA0;2,315,654 Series A units, each consisting of one share of common stock and one half of a warrant to purchase one share of common stock, at a purchase price of $1.00 per Series A unit, and (ii)&#xA0;184,346 Series B units, in lieu of Series A units, at a purchase price of $1.00 per Series B unit to those purchasers whose purchase of additional Series A units in the offering would result in the purchaser beneficially owning more than 9.99% of the Company&#x2019;s outstanding common stock following the completion of the offering. Each Series B unit consists of one fully pre-funded warrant to purchase one share of common stock and one half of a warrant to purchase one share of common stock. The warrants (other than the fully pre-funded warrants) have an exercise price of $1.00 per share. The net offering proceeds received by the Company, after deducting discounts and commissions and expenses incurred with the offering were approximately $2.0 million.</p> </div> -487000 <div> <table style="FONT-SIZE: 10pt; FONT-FAMILY: 'Times New Roman'; BORDER-COLLAPSE: collapse; TEXT-TRANSFORM: none; WORD-SPACING: 0px; WIDOWS: 1; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px" cellspacing="0" cellpadding="0" width="100%" border="0"> <tr> <td valign="top" width="4%" align="left"><b>7.</b></td> <td valign="top" align="left"><b>Convertible Promissory Notes and Series A Preferred Stock</b></td> </tr> </table> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> On May&#xA0;12, 2015, the Company entered into a Securities Purchase Agreement (the &#x201C;Series A Purchase Agreement&#x201D;) with the Company&#x2019;s principal stockholders. On May&#xA0;12, 2015 (the &#x201C;Initial Closing&#x201D;), pursuant to the terms and subject to the conditions contained in the Series A Purchase Agreement, the Company issued and sold to the Purchasers secured convertible promissory notes in the aggregate principal amount of $0.5 million (the &#x201C;Notes&#x201D;). In addition, the Company agreed to issue to the Purchasers, and the Purchasers agreed to purchase from the Company, an aggregate of $2.0 million of shares of Series A Preferred Stock, $0.001 par value per share (the &#x201C;Series A Preferred Stock&#x201D;), at the second closing. The Company determined that the liability to issue the Series A Preferred Stock (the &#x201C;Preferred Stock Liability&#x201D;) at a future date was a freestanding instrument and should be accounted for as a liability. The Company remeasures the Preferred Stock Liability at fair value at each reporting period, with changes being recorded within other (loss) income in the unaudited condensed consolidated statements of operations. During the three month period ending September&#xA0;30, 2015, the Company recorded other income of $31,000 upon remeasurement of the Preferred Stock Liability.</p> <p style="MARGIN-BOTTOM: 0px; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 1px 'Times New Roman'; WIDOWS: 1; MARGIN-TOP: 6px; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> &#xA0;</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 0pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Notes contained a compound embedded derivative that requires separate accounting from the host debt instrument. The Company elected the fair value option for the Notes as management believes recording the Notes at fair value better reflects the underlying economics of the transaction. The Company remeasures the Notes at fair value at each reporting period, with changes being recorded within other (loss) income in the unaudited condensed consolidated statements of operations.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Upon consummation of the Series A Purchase Agreement, the Company allocated the total principal proceeds of $0.5 million between the Preferred Stock Liability and the fair-valued Notes and recorded a loss of $0.5 million in other (loss) income in the unaudited condensed consolidated statements of operations.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Pursuant to the terms of the Series A Purchase Agreement, and as approved by the Company&#x2019;s stockholders at the Company&#x2019;s 2015 Annual Meeting, the Company issued and sold to the Purchasers $2.0 million in shares of Series A Preferred Stock at the second closing that was held on July&#xA0;14, 2015 (the &#x201C;Second Closing&#x201D;).</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <u>Secured Convertible Promissory Notes and Related Agreements</u></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> At the Second Closing, the Notes were automatically converted pursuant to their terms into that number of shares of Series A Preferred Stock equal to the principal amount of the Notes plus all accrued but unpaid interest thereon divided by the purchase price of the Series A Preferred Stock of $1.7003 per share (the &#x201C;Purchase Price&#x201D;).</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Contemporaneously with the execution and delivery of the Series A Purchase Agreement and the issuance of the Notes by the Company to the Purchasers, the Company and the Purchasers entered into a Security Agreement (the &#x201C;Security Agreement&#x201D;), dated May&#xA0;12, 2015, pursuant to which the Company granted to the Purchasers a security interest in substantially all of the Company&#x2019;s assets, other than the Company&#x2019;s intellectual property, to secure the Company&#x2019;s obligations under the Notes. Pursuant to the terms of the Security Agreement, the Company&#x2019;s intellectual property would have become subject to the security interest granted by the Company to the Purchasers upon repayment of all amounts owed under that certain Loan and Security Agreement by and among the Company, General Electric Capital Corporation (&#x201C;GECC&#x201D;) as Agent, the Lenders and the Guarantors dated as of February&#xA0;10, 2012, as amended (&#x201C;the &#x201C;GECC Agreement&#x201D;) referred as the &#x201C;Term Loan&#x201D; (See Note 4). Pursuant to a Subordination and Intercreditor Agreement by and among the Company, the Purchasers and GECC, dated May&#xA0;12, 2015, entered into contemporaneously with the execution and delivery of the Series A Purchase Agreement, the Company&#x2019;s payment obligations under the Notes were subordinated to the Company&#x2019;s payment obligations under the GECC Agreement and the security interest granted by the Company to the Purchasers to secure the Company&#x2019;s obligations under the Notes was subordinated to the security interest granted by the Company to GECC to secure the Company&#x2019;s obligations under the GECC Agreement. In connection with the entry into the Series A Purchase Agreement, the Company and GECC amended the GECC Agreement, dated May&#xA0;12, 2015, to, among other things, permit the Company to enter into the Series A Purchase Agreement and related agreements. Upon the conversion of the Notes into shares of Series A Preferred Stock at the Second Closing, the security interest granted under the Security Agreement was terminated.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Second Closing was subject to the approval of the Company&#x2019;s stockholders at the 2015 Annual Meeting in July 2015 and the satisfaction or waiver of other closing conditions. The Company&#x2019;s stockholders approved the issuance of shares of Series A Preferred Stock, shares of Series A Preferred Stock issuable upon conversion of the Notes and common stock issuable upon conversion of Series A Preferred Stock, at the 2015 Annual Meeting held on July&#xA0;7, 2015.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> On July&#xA0;14, 2015, the Company and the Purchasers entered into the First Amendment to the Series A Purchase Agreement (the &#x201C;First Amendment&#x201D;) pursuant to which the Company and the Purchasers agreed to extend the period of time following the Company&#x2019;s 2015 Annual Meeting for the Second Closing to occur until July&#xA0;14, 2015. At the Second Closing, pursuant to the terms of the Series A Purchase Agreement, the Company issued and sold to the Purchasers 1,176,262 shares of newly designated Series A Preferred Stock of the Company at the Purchase Price of $1.7003 per share for aggregate gross cash proceeds of approximately $2.0 million. In addition, at the Second Closing, the $500,000 in aggregate principal amount of Notes, plus accrued but unpaid interest, that the Company had issued to the Purchasers in the Initial Closing, converted into 298,181 shares of Series A Preferred Stock at the Purchase Price. Following the Second Closing in July 2015, the Company had issued an aggregate of 1,474,443 shares of Series A Preferred Stock, which remain outstanding and held by the Purchasers.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The shares of Series A Preferred Stock have the rights, preferences and privileges set forth in the Restated Certificate of Designations to the Company&#x2019;s Restated Certificate of Incorporation (the &#x201C;Certificate of Designations&#x201D;) that was filed by the Company on August&#xA0;18, 2015 with the Secretary of State of the State of Delaware. The rights, preferences and privileges of the Series A Preferred Stock are as follows:</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Dividends</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Holders of Series A Preferred Stock will be entitled to receive, out of funds legally available for the payment of dividends under Delaware law, cumulative dividends that accrue daily at an annual rate of 8%, compounded and payable quarterly in cash or in additional shares of Series A Preferred Stock at the election of each holder. The holders of Series A Preferred Stock will also be entitled to participate in cash dividends and in-kind distributions made on shares of common stock.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Board of Directors has not declared any dividends on common or preferred stock. At September 30, 2015, the cumulative undeclared dividends on preferred stock total $41,000, and are included as a deduction in determining net loss per share attributable to common shareholders. The carrying value of the Series A Preferred Stock was not adjusted for the cumulative undeclared dividends as the Series A Preferred Stock is not probable of becoming redeemable.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Voting Rights</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Holders of Series A Preferred Stock will be entitled to vote with the holders of the common stock on an as-converted basis, except that no holder of Series A Preferred Stock will be entitled to cast votes for the number of shares of common stock issuable upon conversion of the Series A Preferred Stock held by such holder that exceeds (subject to a proportionate adjustment in the event of a stock split, stock dividend, combination or other proportionate recapitalization) the quotient of (A)&#xA0;the aggregate purchase price paid by such holder for its Series A Preferred Stock, divided by (B)&#xA0;the greater of (i)&#xA0;$3.20 and (ii)&#xA0;the closing price of the common stock on the trading day immediately prior to the date its Series A Preferred Stock is issued, which was $1.40. In addition, prior to the conversion of the Series A Preferred Stock, the consent of the holders of at least a majority of the Series A Preferred Stock then outstanding, voting together as a single class, will be required for the Company to take certain actions, including, among other things: liquidating, dissolving or winding up the business and affairs of the Company or effecting any merger, consolidation or other liquidation event; amending, altering or repealing any provision of the Certificate of Incorporation, the Certificate of Designations or the Bylaws of the Company; creating or authorizing any class or series of capital stock ranking senior to or on parity with the Series A Preferred Stock or increasing the number of authorized shares of Series A Preferred Stock; purchasing, redeeming, paying or declaring dividends on any shares of capital stock of the Company, with certain exceptions; increasing or decreasing the size of the Board of Directors of the Company (the &#x201C;Board&#x201D;); and certain other actions.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Conversion Rights</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Each share of Series A Preferred Stock is convertible into one share of common stock at any time at the option of each holder and automatically upon the written consent of the holders of a majority of the outstanding shares of Series A Preferred Stock. The conversion price will be subject to adjustment in connection with stock splits, combinations, dividends and other corporate transactions affecting the common stock. All other anti-dilution protections that had been provided to the Series A Preferred Stock upon issuance terminated following the Second Closing.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> A contingent beneficial conversion feature was recognized during the three months ending September 30, 2015 as a result of the conversion price being adjusted from $1.7003 to $1.00 at the time of the Second Closing. The Company recorded $1.5 million relating to the contingent beneficial conversion as a deemed dividend. The $1.5 million was included within additional paid-in capital in the condensed consolidated financial statements, and reduced the carrying value of the Series A Preferred Stock. Since the Series A Preferred Stock has no stated redemption date and is immediately convertible, the $1.5 million deemed dividend was immediately accreted, resulting in an increase in the carrying value of the Series A Preferred Stock. The deemed dividend was included as a deduction in determining net loss per share attributable to common shareholders. The conversion price adjustment feature expired following the Second Closing.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Redemption Rights</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> All redemption rights that had been provided to the Series A Preferred Stock upon issuance terminated following the Second Closing.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Ranking</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Series A Preferred Stock will rank senior in preference and priority to the Company&#x2019;s common stock and each other class or series of capital stock of the Company, except for any class or series of capital stock issued in compliance with the terms of the Restated Certificate of Designations.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Liquidation Preference</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Upon liquidation, including deemed liquidations pursuant to a merger, consolidation or a sale of all or substantially all of the Company&#x2019;s assets, the holders of Series A Preferred Stock will be entitled to be paid first out of any proceeds in an amount per share equal to the price at which shares of Series A Preferred Stock were sold in the Series A Preferred Stock financing, plus all accrued but unpaid dividends on each share of Series A Preferred Stock, and prior to payment of any amounts on the Company&#x2019;s common stock. Thereafter, the holders of Series A Preferred Stock will also share pro rata on an as converted to common stock basis in payments made to the holders the Company&#x2019;s common stock. Accordingly, the holders of the Series A Preferred Stock will be entitled to receive the proceeds out of any sale or liquidation of the Company before any such proceeds are paid to holders of the Company&#x2019;s common stock and then share in any proceeds paid to holders of the Company&#x2019;s common stock. As a result, only the sale or liquidation proceeds in excess of the liquidation preference plus accrued but unpaid dividends would be available for distribution to holders of the Company&#x2019;s common stock.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The commissions and issuance costs associated with the Series A Preferred Stock financing were deducted from the carrying value of the Series A Preferred Stock, resulting in the carrying value of the Series A Preferred Stock being reduced below its liquidation value. The Company accretes the carrying value of the Series A Preferred Stock over the period from the date of issuance to the earliest redemption date using the effective interest method. During the nine months ending September 30, 2015, the Company recorded one month of accretion, totaling $56,000, at which point the Company ceased accretion as the Series A Preferred stock was not probable of becoming redeemable.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Board of Directors</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> Holders of Series A Preferred Stock will be entitled to nominate one director to the Board (the &#x201C;Series A Director&#x201D;). Subject to applicable law and stock exchange requirements, the Series A Director will be entitled to serve as a member of each committee of the Board. The rights to nominate a Series A Director will terminate if less than 20% of the shares of Series A Preferred Stock issued under the Securities Purchase Agreement dated May&#xA0;12, 2015, as amended, by and between the Company and the Series A Holders are no longer outstanding.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 18pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> <b>Registration Rights</b></p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Company shall comply with all federal and state laws, rules and regulations and applicable rules and regulations of the Exchange on which shares of the common are then listed. If any shares of common to be reserved for the purpose of conversion of Series A Preferred Stock require registration with or approval of any Person or group (as such term is defined in Section&#xA0;13(d)(3) of the Exchange Act) under any federal or state law or the rules and regulations of the Exchange on which shares of the common stock are then listed before such shares may be validly issued or delivered upon conversion, then the Company will, as expeditiously as reasonably practicable, use commercially reasonable efforts to secure such registration or approval, as the case may be. So long as any common stock into which the of Series A Preferred Stock are then convertible is then listed on an Exchange, the Company will list and keep listed on any such Exchange, upon official notice of issuance, all shares of such common stock issuable upon conversion.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> As the holders of the Series A Preferred Stock are entitled to receive liquidation preferences that other equity holders are not entitled to, the Company determined that the preferred stock should be classified as temporary equity in the condensed consolidated financial statements.</p> <p style="MARGIN-BOTTOM: 0pt; WHITE-SPACE: normal; TEXT-TRANSFORM: none; WORD-SPACING: 0px; COLOR: rgb(0,0,0); FONT: 10pt 'Times New Roman'; MARGIN-LEFT: 75px; WIDOWS: 1; MARGIN-TOP: 6pt; LETTER-SPACING: normal; TEXT-INDENT: 0px; -webkit-text-stroke-width: 0px"> The Company reviews the rights and preferences of its equity securities for any changes in terms, rights or preferences to determine if such change is a modification or an extinguishment. The Company evaluates amendments to equity securities using a qualitative method which considers the business purpose for the amendment and whether it adds, deletes or significantly changes a substantive contractual term or the nature of the equity securities. An amendment that changes a substantive contractual term or fundamentally changes the nature of the share of preferred stock is considered an extinguishment. If considered an extinguishment, the Company accounts for the removal of the carrying value of the old securities and recognizes the new securities at their current fair value. An amendment that does not meet these criteria is a modification. If considered a modification, the Company estimates the fair value of the equity security pre- and post- modification and recognizes the incremental fair value, if any, resulting from the modified terms. During the nine months ending September 30, 2015, the Company determined that all changes to the terms of the Series A Preferred Stock resulting from amendments made to the Certificates of Designations were not substantive and should be accounted for as a modification. The amendments did not result in a material change to the fair value of the Series A Preferred Stock.</p> </div> 29.93 23.93 26.33 504000 456000 225000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The table below sets forth a summary of changes in the fair value of the Company&#x2019;s level 3 liability (preferred stock liability) for the three and nine months ending September 30, 2015:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"><!-- Begin Table Head --> <tr> <td width="62%"></td> <td valign="bottom" width="16%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="16%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Three&#xA0;Months&#xA0;Ended<br /> September 30, 2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Nine&#xA0;Months&#xA0;Ended<br /> September 30, 2015</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"><b>(in thousands)</b></td> <td valign="bottom">&#xA0;</td> </tr> <!-- End Table Head --><!-- Begin Table Body --> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Beginning balance</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">31</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Loss on recognition of preferred stock liability</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">79</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Gain on revaluation of preferred stock liability</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(31</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(79</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Ending balance</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 3px double">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <!-- End Table Body --></table> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> &#xA0;</p> </div> 79000 79000 <div> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 4%; MARGIN-TOP: 6pt"> The table below sets forth a summary of changes in the fair value of the Company&#x2019;s secured convertible notes for the three and nine months ended September 30, 2015:</p> <p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt"> &#xA0;</p> <table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"><!-- Begin Table Head --> <tr> <td width="62%"></td> <td valign="bottom" width="16%"></td> <td></td> <td></td> <td></td> <td valign="bottom" width="16%"></td> <td></td> <td></td> <td></td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Three&#xA0;Months&#xA0;Ended<br /> September 30, 2015</b></td> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>Nine&#xA0;Months&#xA0;Ended<br /> September 30, 2015</b></td> <td valign="bottom">&#xA0;</td> </tr> <tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman"> <td valign="bottom">&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" colspan="6" align="center"><b>(in thousands)</b></td> <td valign="bottom">&#xA0;</td> </tr> <!-- End Table Head --><!-- Begin Table Body --> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Beginning balance</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">$</td> <td valign="bottom" align="right">929</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">$</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Proceeds from secured convertible note</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;</td> <td valign="bottom" nowrap="nowrap" align="right"> &#x2014;&#xA0;&#xA0;</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">500</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Loss on fair value adjustment</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">58</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">487</td> <td valign="bottom" nowrap="nowrap">&#xA0;&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman"> <td valign="top"> <p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em"> Conversion of secured convertible notes</p> </td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(987</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom">&#xA0;</td> <td valign="bottom" align="right">(987</td> <td valign="bottom" nowrap="nowrap">)&#xA0;</td> </tr> <tr style="FONT-SIZE: 1px"> <td valign="bottom"></td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> <td valign="bottom">&#xA0;&#xA0;</td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td valign="bottom"> <p style="BORDER-TOP: rgb(0,0,0) 1px solid">&#xA0;</p> </td> <td>&#xA0;</td> </tr> <tr style="FONT-SIZE: 10pt; 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Term Loan - Additional Information (Detail)
Feb. 10, 2012
USD ($)
Term loans  
Debt Instrument [Line Items]  
Loan facility amount borrowed $ 10,000,000

XML 15 R9.htm IDEA: XBRL DOCUMENT v3.3.0.814
Term Loan
9 Months Ended
Sep. 30, 2015
Term Loan
4. Term Loan

On February 10, 2012, the Company entered into a secured term loan facility, and a term loan in the aggregate principal amount of $10.0 million was funded upon the closing of the transaction. On July 14, 2015, the Company paid off all of its outstanding obligations under that certain Loan and Security Agreement by and among the Company, General Electric Capital Corporation (“GECC”) as agent and the lenders and the guarantors thereto dated as of February 10, 2012, as amended (the “GECC Agreement”), and terminated the GECC Agreement. The security interest granted by the Company to GECC in its assets in connection with the GECC Agreement was also terminated at the time of the payoff. Notwithstanding the payoff, the warrants to purchase the Company’s common stock that the Company previously issued to GECC’s affiliate, GE Capital Equity Investments, Inc., and Comerica Bank in connection with the GECC Agreement, continue to remain outstanding in accordance with their terms and are not affected by the payoff.

XML 16 R28.htm IDEA: XBRL DOCUMENT v3.3.0.814
Convertible Promissory Notes and Series A Preferred Stock - Additional Information (Detail) - USD ($)
3 Months Ended 9 Months Ended
Jul. 14, 2015
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Jul. 31, 2015
May. 12, 2015
Dec. 31, 2014
Debt Conversion [Line Items]                
Preferred stock issues and sold, purchase price   $ 0.001   $ 0.001       $ 0.001
Other income recorded upon remeasurement of preferred stock liability   $ 31,000            
Other (loss) income   7,000 $ 1,000 $ (514,000) $ 2,000      
Preferred stock issued, value   $ 2,594,000   $ 2,594,000        
Preferred stock, shares issued   1,474,443   1,474,443       0
Aggregate gross cash proceeds from issuance of preferred shares       $ 2,000,000        
Debt amount converted in to preferred shares       987,000        
Deemed dividend on beneficial conversion feature   $ 1,507,000   1,507,000        
Additional paid in capital, preferred stock   1,500,000   1,500,000        
Accretion of convertible preferred stock to liquidation value   56,000   56,000        
Secured convertible promissory notes                
Debt Conversion [Line Items]                
Principal amount of secured convertible promissory notes issued and sold             $ 500,000  
Aggregate principal amount of Notes, plus accrued unpaid interest                
Debt Conversion [Line Items]                
Debt amount converted in to preferred shares $ 500,000              
Series A                
Debt Conversion [Line Items]                
Preferred stock approved to issue             $ 2,000,000  
Preferred stock issues and sold, purchase price $ 1.7003           $ 0.001  
Preferred stock issued, value   2,000,000   2,000,000     $ 2,000,000  
Preferred stock sold, value   $ 2,000,000   $ 2,000,000     $ 2,000,000  
Preferred stock, shares issued 1,176,262         1,474,443    
Preferred stock, shares sold 1,176,262              
Aggregate gross cash proceeds from issuance of preferred shares $ 2,000,000              
Number of preferred shares issued upon debt conversion 298,181              
Preferred stock, voting rights       Holders of Series A Preferred Stock will be entitled to vote with the holders of the common stock on an as-converted basis, except that no holder of Series A Preferred Stock will be entitled to cast votes for the number of shares of common stock issuable upon conversion of the Series A Preferred Stock held by such holder that exceeds (subject to a proportionate adjustment in the event of a stock split, stock dividend, combination or other proportionate recapitalization) the quotient of (A) the aggregate purchase price paid by such holder for its Series A Preferred Stock, divided by (B) the greater of (i) $3.20 and (ii) the closing price of the common stock on the trading day immediately prior to the date its Series A Preferred Stock is issued, which was $1.40. In addition, prior to the conversion of the Series A Preferred Stock, the consent of the holders of at least a majority of the Series A Preferred Stock then outstanding, voting together as a single class, will be required for the Company to take certain actions, including, among other things: liquidating, dissolving or winding up the business and affairs of the Company or effecting any merger, consolidation or other liquidation event; amending, altering or repealing any provision of the Certificate of Incorporation, the Certificate of Designations or the Bylaws of the Company; creating or authorizing any class or series of capital stock ranking senior to or on parity with the Series A Preferred Stock or increasing the number of authorized shares of Series A Preferred Stock; purchasing, redeeming, paying or declaring dividends on any shares of capital stock of the Company, with certain exceptions; increasing or decreasing the size of the Board of Directors of the Company (the “Board”); and certain other actions.        
Convertible preferred stock voting rights threshold   $ 3.20   $ 3.20        
Purchase price   1.40   $ 1.40        
Convertible preferred stock, terms of conversion       Each share of Series A Preferred Stock is convertible into one share of common stock at any time at the option of each holder and automatically upon the written consent of the holders of a majority of the outstanding shares of Series A Preferred Stock. The conversion price will be subject to adjustment in connection with stock splits, combinations, dividends and other corporate transactions affecting the common stock.        
Series A | Minimum                
Debt Conversion [Line Items]                
Rights to nominate director will terminate if share of preferred stock fall bellow the threshold       20.00%        
Series A | Adjustment                
Debt Conversion [Line Items]                
Preferred stock issues and sold, purchase price   $ 1.00   $ 1.00        
Cumulative Preferred Stock                
Debt Conversion [Line Items]                
Preferred stock, annual dividend rate, percentage       8.00%        
Undeclared dividends       $ 41,000        
XML 17 R8.htm IDEA: XBRL DOCUMENT v3.3.0.814
Fair Value of Financial Instruments
9 Months Ended
Sep. 30, 2015
Fair Value of Financial Instruments
3. Fair Value of Financial Instruments

At September 30, 2015, the Company’s financial instruments consisted of cash, accounts receivable, and accounts payable. The carrying amounts of accounts receivable and accounts payable are considered reasonable estimates of their fair value, due to the short maturity of these instruments.

In accordance with U.S. generally accepted accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The assets or liabilities fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The table below sets forth a summary of changes in the fair value of the Company’s level 3 liability (preferred stock liability) for the three and nine months ending September 30, 2015:

 

     Three Months Ended
September 30, 2015
     Nine Months Ended
September 30, 2015
 
     (in thousands)  

Beginning balance

   $ 31       $ —     

Loss on recognition of preferred stock liability

     —           79   

Gain on revaluation of preferred stock liability

     (31      (79
  

 

 

    

 

 

 

Ending balance

   $ —         $ —     
  

 

 

    

 

 

 

The resulting initial recognition and subsequent revaluation were recorded as other income (expense) in the unaudited condensed consolidated statements of operations

The table below sets forth a summary of changes in the fair value of the Company’s secured convertible notes for the three and nine months ended September 30, 2015:

 

     Three Months Ended
September 30, 2015
     Nine Months Ended
September 30, 2015
 
     (in thousands)  

Beginning balance

   $ 929       $ —     

Proceeds from secured convertible note

     —           500   

Loss on fair value adjustment

     58         487   

Conversion of secured convertible notes

     (987      (987
  

 

 

    

 

 

 

Ending balance

   $ —         $ —     
  

 

 

    

 

 

 

The resulting fair value adjustment was recorded as other income (expense) in the unaudited condensed consolidated statements of operations.

The preferred stock liability was valued using the Black-Scholes option pricing model as of May 12, 2015, the issuance date of the secured convertible note, resulting in a fair value of $79,000. This valuation considered an underlying security price of $2.12, strike price of $2.68, risk-free interest rate of 0.02%, expected dividend yield of 0%, volatility factor of 73.8%, and expected term of 0.22 years. The preferred stock liability was revalued as of June 30, 2015 resulting in a fair value of $31,000. This valuation considered an underlying security price of $2.00, strike price of $2.68, risk-free interest rate of 0.03%, expected dividend yield of 0%, volatility factor of 73.8%, and expected term of 0.08 years. As of July 14, 2015, the mandatory conversion of the preferred stock occurred, resulting in a remaining term of zero and thereby a fair value of zero.

The secured convertible promissory notes valuation analysis was based on the probability-weighted expected return method (“PWERM”) utilizing various scenarios for the expected payout of the instrument covering the full range of the potential outcomes. The PWERM determines the value of an instrument, based upon an analysis of future values for the subject instruments, which takes into consideration the full range of the potential cash flows available to the subject instrument. The instrument value is based upon the present value of the probability of each future outcome becoming available to the instrument, and the economic rights and preferences of the instrument.

 

Due to the lack of relevant and market reflective Level 1 and Level 2 inputs, the Company valued the instruments using Level 3 inputs, which require significant judgment and estimates on behalf of management in developing model assumptions. The fair value model used in valuing the convertible debt instrument as of June 30, 2015 utilized the following inputs: conversion price per share, current and future stock prices, discount rate, and volatility. The following assumptions were made in the model: (1) conversion price of $2.68 per share, (2) current common stock price of $2.36 per share, (3) simulated future common stock price of $2.14 per share, (4) discount rate of 18.0%, (5) expected stock price volatility related to the current common stock price of 51.0%, and (6) expected stock price volatility related to the simulated future common stock price of 55.0%. At the conversion date of July 14, 2015, the following inputs were utilized in valuing the convertible debt instrument: (1) conversion price of $3.33 per share, (2) current common stock price of $1.54 per share, (3) discount rate of 18.0%, and (4) expected stock price volatility of 56.2%.

XML 18 R2.htm IDEA: XBRL DOCUMENT v3.3.0.814
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Sep. 30, 2015
Dec. 31, 2014
Current assets    
Cash $ 2,642 $ 4,123
Accounts receivable (net of allowances for doubtful accounts of $151 and $0, as of September 30, 2015 and December 31, 2014, respectively) 152 174
Inventory 223 400
Prepaid expenses and other current assets 139 154
Total current assets 3,156 4,851
Property and equipment, net 14 117
Intangible assets, net 92 135
Deposits and other assets 94 126
Total assets 3,356 5,229
Current liabilities    
Term loan   2,960
Accounts payable 1,332 695
Accrued expenses 562 906
Other current liabilities 48 18
Total current liabilities 1,942 4,579
Other liabilities 94 93
Total liabilities $ 2,036 $ 4,672
Commitments and contingencies (Note 5)
Convertible preferred stock; $.001 par value; 5,000,000 and 0 shares authorized at September 30, 2015 and December 31, 2014, respectively; 1,474,443 and 0 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively; liquidation preference of $2,548 at September 30, 2015 $ 2,594  
Stockholders' (deficit) equity    
Common stock; $.001 par value; 100,000,000 shares authorized at September 30, 2015 and December 31, 2014; 11,126,579 and 8,632,810 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively 11 $ 9
Additional paid-in capital 164,118 161,550
Accumulated deficit (165,403) (161,002)
Total stockholders' (deficit) equity (1,274) 557
Total liabilities and stockholders' (deficit) equity $ 3,356 $ 5,229
XML 19 R6.htm IDEA: XBRL DOCUMENT v3.3.0.814
Description of Business and Basis of Presentation
9 Months Ended
Sep. 30, 2015
Description of Business and Basis of Presentation
1. Description of Business and Basis of Presentation

Description of Business

BG Medicine, Inc. (“BG Medicine” or the “Company”) is a commercial stage company that is focused on the development and delivery of diagnostic solutions to aid in the clinical management of heart failure and related disorders.

The Company’s BGM Galectin-3® Test is an in vitro diagnostic device that employs a manual micro-titer platform to quantitatively measure galectin-3 levels in blood plasma or serum for use as an aid in assessing the prognosis of chronic heart failure in conjunction with clinical evaluation. The BGM Galectin-3® Test is cleared by the U.S. Food and Drug Administration (the “FDA”), is CE-marked and is currently available as a blood test in the United States and the European Union (“EU”).

The Company has entered into licensing agreements with leading diagnostic instrument manufacturers to develop and commercialize galectin-3 assays that will be performed on automated platforms that have been incorporated into routine practice in laboratories throughout the world. On December 23, 2014, the FDA granted 510(k) clearance for the ARCHITECT ® Galectin-3 assay, the first FDA cleared automated blood test for Galectin-3, as an aid in assessing the prognosis of patients diagnosed with chronic heart failure in conjunction with clinical evaluation. On July 6, 2015, the Company announced that the ARCHITECT ® Galectin-3 assay is now available in the United States. This is the first automated test for galectin-3 to be introduced for commercial use in the United States. The ARCHITECT ® Galectin-3 assay is performed using the Abbott ARCHITECT ® automated immunoassay analyzer and is being commercialized through an agreement between the Company and Abbott.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. The interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position at September 30, 2015 and results of operations and cash flows for the interim periods ended September 30, 2015 and 2014.

On July 8, 2015, the Company effected a 1-for-4 reverse stock split of its common stock. All previously reported common stock share amounts in the accompanying financial statements and related notes have been retroactively adjusted to reflect the reverse stock split. As a result of the reverse stock split, the stated capital on the Company’s balance sheet attributable to its common stock, which consists of the par value per share of its common stock multiplied by the aggregate number of shares of its common stock issued and outstanding, has been reduced in proportion to the size of the reverse stock split. Correspondingly, the Company’s additional paid-in capital account, which consists of the difference between its stated capital and the aggregate amount paid to the Company upon issuance of all currently outstanding shares of its common stock, has been credited with the amount by which the stated capital is reduced.

The Company considers events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates and to identify matters that require additional disclosure. Subsequent events have been evaluated through the date of issuance of these financial statements. The results for the nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015 or for any other interim period or for any other future year. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

At September 30, 2015, the Company had cash totaling $2.6 million, an outstanding balance of $0 under its secured term loan facility, which the Company repaid and which was terminated in July 2015, and stockholders’ deficit of $1.3 million. During the nine months ended September 30, 2015, the Company incurred a net loss of $4.4 million, used $2.6 million of cash in operating activities and used $3.0 million of cash for payments to extinguish the term loan facility. The Company expects to continue to incur losses and use cash in operating activities for the foreseeable future.

The Company is in the early stages of commercializing its BGM Galectin-3 Test and assisting with the commercialization of the ARCHITECT® Galectin-3 assay. Interest in the testing for galectin-3 is increasing as a result of the Company’s market development activities, although it has not yet translated into significant revenue. In order to achieve profitability, the Company will need to generate significant product revenues.

 

Effective January 1, 2014, the payment rate at which testing for galectin-3 is reimbursed by the Centers for Medicare and Medicaid Services (“CMS”), was increased to $30.01 from $17.80 per test. In 2015, the national limitation amount for testing for galectin-3 was reduced to $29.93 and applies across the U.S., except in Ohio and West Virginia where rates of $23.93 and $26.33, respectively, apply.

Since September 11, 2014, the Company has implemented a reduction of approximately 77% of its workforce, or 17 people (the “Restructuring”), leaving 5 employees. The Company took this step in order to reduce its operating expenses and extend its cash runway in anticipation of the commercial launch of automated versions of the Company’s galectin-3 test. The automated galectin-3 tests are being developed and commercialized by the Company’s diagnostic instrument manufacturing partners and will be performed on the partners’ automated platforms.

The Restructuring primarily eliminated the Company’s sales and marketing organization and removed certain positions in other functional areas, while preserving some senior management and other critical roles to support the clinical and commercial adoption of galectin-3 testing by providing support to the marketing and selling efforts of its automated partners, clinical research studies that have incorporated galectin-3 testing and by expanding the BGM Galectin-3 Test’s labeling indications for use through additional clinical studies and clearances by the FDA.

Employees affected by the Restructuring were provided with severance arrangements including outplacement assistance. As a result of the Restructuring, the Company has recorded total charges with respect to severance payments and benefits continuation of approximately $404,000 and $98,000 during 2014 and 2015, respectively. Of the total $404,000 charges in 2014, $128,000 was recorded in research and development, $114,000 was recorded in sales and marketing, and $162,000 was recorded in general and administrative expense. Of the $98,000 charges in 2015, $41,000 was recorded in research and development and $57,000 was recorded in sales and marketing expense. The Company paid approximately $277,000 of such expenses during the third and fourth quarters of 2014 and $225,000 during the first three quarters of 2015. As a result of the Restructuring, the Company estimates it will generate annualized expense savings of approximately $2.4 million primarily from savings in employee salaries and benefits.

In May 2015, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the Company’s principal stockholders, Pursuant to the terms and subject to the conditions contained in the Purchase Agreement, the Company issued and sold to the purchasers (the “Purchasers”) secured convertible promissory notes in an aggregate principal amount of $500,000. In addition and pursuant to the terms of the Purchase Agreement, and as approved by the Company’s stockholders at the Company’s 2015 annual meeting of stockholders (the “2015 Annual Meeting”) and the satisfaction or waiver of other closing conditions, the Company issued and sold to the purchasers $2,000,000 of shares of newly created Series A Preferred Stock, $0.001 par value per share of the Company at the second closing that was held on July 14, 2015 following the Company’s 2015 Annual Meeting.

In June 2015, the Company entered into a sublease agreement with a third party for the 880 Winter Street office space. The term of the sublease is from June 1, 2015 through December 31, 2018 covering the balance of the underlying lease term. The Company has recorded in operating costs total charges of $153,000 with respect to the net present value of the net costs that will continue to be incurred under the lease for its remaining term and the real estate brokerage commissions on the sublease. The Company has obtained office space on a short term rental basis and expects to generate annualized savings of approximately $240,000.

As further described in Note 4, the Company had a term loan facility that was secured by substantially all of the Company’s assets. On July 14, 2015 the Company paid off all of its outstanding obligations under the term loan.

In August 2015, the Company closed on an underwritten public offering of (i) 2,315,654 Series A units, each consisting of one share of common stock and one half of a warrant to purchase one share of common stock, at a purchase price of $1.00 per Series A unit, and (ii) 184,346 Series B units, in lieu of Series A units, at a purchase price of $1.00 per Series B unit to those purchasers whose purchase of additional Series A units in the offering would result in the purchaser beneficially owning more than 9.99% of the Company’s outstanding common stock following the completion of the offering. Each Series B unit consists of one fully pre-funded warrant to purchase one share of common stock and one half of a warrant to purchase one share of common stock. The warrants (other than the fully pre-funded warrants) have an exercise price of $1.00 per share. The net offering proceeds received by the Company, after deducting discounts and commissions and expenses incurred with the offering were approximately $2.0 million.

The Company’s common stock had been listed for trading on The NASDAQ Capital Market until September 15, 2015, when it was suspended for failure to comply with The NASDAQ Capital Market continued listing standards. On September 16, 2015, the Company’s common stock began trading on the OTC Markets’ OTCQB market tier under the trading symbol “BGMD.” The delisting of the Company’s common stock from The NASDAQ Capital Market could substantially further reduce the liquidity of the Company’s common stock and result in a corresponding material reduction in the price of the Company’s common stock. In addition, the delisting could negatively affect the Company by reducing the number of investors willing to hold or acquire the Company’s common stock, which could negatively affect the Company’s ability to raise capital, and may result in the potential loss of confidence by investors, suppliers, customers and employees and fewer business development opportunities.

The Company believes that its existing cash will be sufficient to fund its operations into July 2016. For the foreseeable future and until the Company generates significant product revenues to reach cash breakeven, the Company will need to raise additional funds to finance its operations beyond July 2016. The Company may not be able to obtain adequate financing to do so when necessary, and the terms of any financings may not be advantageous to the Company and any financings may result in dilution to the Company’s stockholders.

The above circumstances along with the Company’s history, the near term forecast of incurring net losses and negative operating cash flows, the Company’s dependence on near-term revenues generated from product fees due from a single automated partner, the Company’s limited experience with the amount and timing of sales made by its automated partners and its inability to predict the timing of the market introduction of automated tests and product fees generated by the sale of automated tests by its other automated partners raise substantial doubt regarding the Company’s ability to continue as a going concern for a reasonable period of time. The accompanying unaudited condensed consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability to continue as a going concern.

XML 20 R22.htm IDEA: XBRL DOCUMENT v3.3.0.814
Summary of Changes in Fair Value of Company's Level 3 Liability (Detail) - Preferred Stock Liability - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2015
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]    
Beginning balance $ 31  
Loss on recognition of preferred stock liability   $ 79
Gain on revaluation of preferred stock liability $ (31) $ (79)
XML 21 R24.htm IDEA: XBRL DOCUMENT v3.3.0.814
Fair Value of Financial Instruments - Additional Information (Detail) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended
Jul. 14, 2015
May. 12, 2015
Jun. 30, 2015
Preferred Stock Liability      
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]      
Preferred stock liability, fair value $ 0 $ 79 $ 31
Underlying security price   $ 2.12 $ 2.00
Conversion price per share   $ 2.68 $ 2.68
Risk-free interest rate   0.02% 0.03%
Expected dividend yield   0.00% 0.00%
Expected stock price volatility   73.80% 73.80%
Expected term 0 years 2 months 19 days 29 days
Convertible Debt Instrument      
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]      
Preferred stock liability, fair value     $ 929
Conversion price per share $ 3.33   $ 2.68
Discount rate 18.00%   18.00%
Convertible Debt Instrument | Current Common Stock Price      
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]      
Expected stock price volatility 56.20%   51.00%
Stock price per share $ 1.54   $ 2.36
Convertible Debt Instrument | Future Common Stock Price      
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]      
Expected stock price volatility     55.00%
Stock price per share     $ 2.14
XML 22 Show.js IDEA: XBRL DOCUMENT /** * Rivet Software Inc. * * @copyright Copyright (c) 2006-2011 Rivet Software, Inc. All rights reserved. * Version 2.4.0.3 * */ var Show = {}; Show.LastAR = null, Show.hideAR = function(){ Show.LastAR.style.display = 'none'; }; Show.showAR = function ( link, id, win ){ if( Show.LastAR ){ Show.hideAR(); } var ref = link; do { ref = ref.nextSibling; } while (ref && ref.nodeName != 'TABLE'); if (!ref || ref.nodeName != 'TABLE') { var tmp = win ? win.document.getElementById(id) : document.getElementById(id); if( tmp ){ ref = tmp.cloneNode(true); ref.id = ''; link.parentNode.appendChild(ref); } } if( ref ){ ref.style.display = 'block'; Show.LastAR = ref; } }; Show.toggleNext = function( link ){ var ref = link; do{ ref = ref.nextSibling; }while( ref.nodeName != 'DIV' ); if( ref.style && ref.style.display && ref.style.display == 'none' ){ ref.style.display = 'block'; if( link.textContent ){ link.textContent = link.textContent.replace( '+', '-' ); }else{ link.innerText = link.innerText.replace( '+', '-' ); } }else{ ref.style.display = 'none'; if( link.textContent ){ link.textContent = link.textContent.replace( '-', '+' ); }else{ link.innerText = link.innerText.replace( '-', '+' ); } } }; XML 23 R7.htm IDEA: XBRL DOCUMENT v3.3.0.814
Significant Accounting Policies
9 Months Ended
Sep. 30, 2015
Significant Accounting Policies
2. Significant Accounting Policies

Product Revenues

Product revenues are recognized when the following criteria have been met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred and risk of loss has passed; (iii) the seller’s price to the buyer is fixed or determinable; and (iv) collectability is reasonably assured.

The Company sells its products through supply agreements with laboratory testing services and diagnostic testing distributors and directly to hospitals and clinics. The Company recognizes revenue when products are received by customers, at which time both title and risk of loss have passed to the customers. The Company negotiates credit terms on a customer-by-customer basis and products are shipped at an agreed-upon price.

Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. Freight costs billed to customers are recorded as revenue.

In the past the Company did not provide an allowance for doubtful accounts or a reserve for sales returns as the Company has not experienced any credit losses, and returns are only allowed for defects in workmanship. On June 7, 2015, Health Diagnostic Laboratory, Inc. (“HDL”), which is the Company’s largest customer of its BGM Galectin-3 ® Test, filed a voluntary petition for bankruptcy protection under Chapter 11 in the United States Bankruptcy Court for the Eastern District of Virginia, Richmond Division. In light of this filing the Company provided a provision for doubtful accounts of $151,000 in the second quarter of 2015. On September 11, 2015, True Health Diagnostics announced the acquisition of HDL, in a court-supervised auction has not yet filed a plan of liquidation or reorganization. Thus, it is uncertain what distribution will be made on account of allowed claims. Further, the court approved HDL’s request to extend the exclusive deadline by which HDL may file a plan of liquidation or reorganization until early 2016.

Product Fee Revenues

The Company recognizes product fee revenue when it receives quarterly test sales reporting and payments thereunder from its partners. The Company has entered into worldwide license, development and commercialization agreements with Abbott Laboratories, (“Abbott”), bioMérieux SA, (“bioMérieux”), Siemens Healthcare Diagnostics Inc., (“Siemens”), and Alere Inc., (“Alere”). As consideration for the rights and licenses granted by the Company to its partners, the licensees pay to the Company a product fee, as set forth in the respective agreements, for tests sold to third parties. To date, only Abbott and bioMérieux have paid product fees to the Company.

 

Product Fee Reclassification

Beginning in the third quarter of 2015, the Company began disclosing product fee revenue separately from product revenue. To maintain comparability, all previously reported product revenue figures in the accompanying unaudited condensed consolidated financial statements have been retroactively adjusted to break out the product fee revenue recognized during those periods. Management evaluated the amount and nature of the change and concluded that it was not material to either the previously reported annual or quarterly financial statement results of operations. Nonetheless, the Company has reclassified the historical statement of operations amounts included in this filing as follows (in thousands):

 

     As reported
Three months ended
September 30, 2014
     As reclassified
Three months ended
September 30, 2014
     As reported
Nine months ended
September 30, 2014
     As reclassified
Nine months ended
September 30, 2014
 

Product Revenues

   $ 695       $ 669       $ 2,233       $ 2,158   

Product Fee Revenues

     —           26         —           75   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Revenues

   $ 695       $ 695       $ 2,233       $ 2,233   
  

 

 

    

 

 

    

 

 

    

 

 

 

Inventory

Inventory is stated at the lower of cost or market. Costs are determined under the first-in, first-out (FIFO) method. Inventories consisted of the following:

 

(in thousands)    September 30, 2015      December 31, 2014  

Raw materials

   $ 45       $ 64   

Finished goods

     178         336   
  

 

 

    

 

 

 

Total inventories

   $ 223       $ 400   
  

 

 

    

 

 

 

Net Loss Per Share Attributable to Common Shareholders

Basic and diluted net loss per share attributable to common shareholders is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. The Company applied the two-class method to calculate its basic and diluted net loss per share of common stock, as its convertible preferred stock, common stock, and warrants to purchase common stock are participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common shareholders. However, the two-class method does not impact the net loss per share of common stock as the Company was in a loss position for each of the periods presented, and neither preferred shareholders nor warrant holders participate in losses.

The following table summarizes the computation of basic and diluted net loss per share for the three and nine months ended September 30, 2015 and 2014:

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2015      2014      2015      2014  
     (in thousands, except share and per share data)  

Net loss

   $ (1,023    $ (2,397    $ (4,401    $ (6,744

Preferred stock dividend

     (41      —           (41      —     

Deemed dividend on beneficial conversion feature

     (1,507      —           (1,507      —     

Accretion of convertible preferred stock to liquidation value

     (56      —           (56      —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net loss attributable to common shareholders

   $ (2,627    $ (2,397    $ (6,005    $ (6,744

Weighted average number of shares - basic and diluted

     9,862,802         8,604,312         9,057,960         8,028,373   

Net loss per share attributable to common shareholders - basic and diluted

   $ (0.27    $ (0.28    $ (0.66    $ (0.84

As of September 30, 2015 and 2014, the following potential common shares were excluded from the computation of diluted net loss per share because they had an antidilutive impact due to the losses reported:

 

     September 30,  
     2015      2014  

Options to purchase common stock

     699,513         644,789   

Warrants to purchase common stock

     1,536,929         216,156   

 

XML 24 R3.htm IDEA: XBRL DOCUMENT v3.3.0.814
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2015
Dec. 31, 2014
Allowances for doubtful accounts $ 151 $ 0
Preferred stock, par value $ 0.001 $ 0.001
Preferred stock, shares authorized 5,000,000 0
Preferred stock, shares issued 1,474,443 0
Preferred stock, shares outstanding 1,474,443 0
Preferred stock, liquidation preference $ 2,548  
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 11,126,579 8,632,810
Common stock, shares outstanding 11,126,579 8,632,810
XML 25 R17.htm IDEA: XBRL DOCUMENT v3.3.0.814
Significant Accounting Policies - Additional Information (Detail) - USD ($)
3 Months Ended 9 Months Ended
Jun. 30, 2015
Sep. 30, 2015
Significant Accounting Policies [Line Items]    
Provision for doubtful accounts $ 151,000 $ 151,000
XML 26 R1.htm IDEA: XBRL DOCUMENT v3.3.0.814
Document and Entity Information - shares
9 Months Ended
Sep. 30, 2015
Oct. 31, 2015
Document Information [Line Items]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Sep. 30, 2015  
Document Fiscal Year Focus 2015  
Document Fiscal Period Focus Q3  
Trading Symbol BGMD  
Entity Registrant Name BG MEDICINE, INC.  
Entity Central Index Key 0001407038  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   11,126,579
XML 27 R18.htm IDEA: XBRL DOCUMENT v3.3.0.814
Summary of Reclassified Amounts of Historical Statement of Operations (Detail) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Error Corrections and Prior Period Adjustments Restatement [Line Items]        
Product revenues $ 274 $ 669 $ 1,160 $ 2,158
Product fee revenues 60 26 116 75
Total revenues $ 334 695 $ 1,276 2,233
Scenario, Previously Reported        
Error Corrections and Prior Period Adjustments Restatement [Line Items]        
Product revenues   695   2,233
Total revenues   $ 695   $ 2,233
XML 28 R4.htm IDEA: XBRL DOCUMENT v3.3.0.814
Condensed Consolidated Statements of Operations - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Revenues:        
Product revenues $ 274 $ 669 $ 1,160 $ 2,158
Product fee revenues 60 26 116 75
Total revenues 334 695 1,276 2,233
Costs and operating expenses:        
Product and product fee costs 103 234 423 764
Research and development 333 724 1,314 1,855
Selling and marketing 4 647 289 2,069
General and administrative 920 1,323 2,978 3,696
Total costs and operating expenses 1,360 2,928 5,004 8,384
Loss from operations (1,026) (2,233) (3,728) (6,151)
Interest income       2
Interest expense (4) (165) (159) (597)
Other income (loss) 7 1 (514) 2
Net loss (1,023) (2,397) (4,401) (6,744)
Preferred stock dividend (41)   (41)  
Deemed dividend on beneficial conversion feature (1,507)   (1,507)  
Accretion of convertible preferred stock to liquidation value (56)   (56)  
Net loss attributable to common shareholders $ (2,627) $ (2,397) $ (6,005) $ (6,744)
Net loss per share attributable to common shareholders - basic and diluted $ (0.27) $ (0.28) $ (0.66) $ (0.84)
Weighted-average common shares outstanding used in computing per share amounts - basic and diluted 9,862,802 8,604,312 9,057,960 8,028,373
XML 29 R12.htm IDEA: XBRL DOCUMENT v3.3.0.814
Convertible Promissory Notes and Series A Preferred Stock
9 Months Ended
Sep. 30, 2015
Convertible Promissory Notes and Series A Preferred Stock
7. Convertible Promissory Notes and Series A Preferred Stock

On May 12, 2015, the Company entered into a Securities Purchase Agreement (the “Series A Purchase Agreement”) with the Company’s principal stockholders. On May 12, 2015 (the “Initial Closing”), pursuant to the terms and subject to the conditions contained in the Series A Purchase Agreement, the Company issued and sold to the Purchasers secured convertible promissory notes in the aggregate principal amount of $0.5 million (the “Notes”). In addition, the Company agreed to issue to the Purchasers, and the Purchasers agreed to purchase from the Company, an aggregate of $2.0 million of shares of Series A Preferred Stock, $0.001 par value per share (the “Series A Preferred Stock”), at the second closing. The Company determined that the liability to issue the Series A Preferred Stock (the “Preferred Stock Liability”) at a future date was a freestanding instrument and should be accounted for as a liability. The Company remeasures the Preferred Stock Liability at fair value at each reporting period, with changes being recorded within other (loss) income in the unaudited condensed consolidated statements of operations. During the three month period ending September 30, 2015, the Company recorded other income of $31,000 upon remeasurement of the Preferred Stock Liability.

 

The Notes contained a compound embedded derivative that requires separate accounting from the host debt instrument. The Company elected the fair value option for the Notes as management believes recording the Notes at fair value better reflects the underlying economics of the transaction. The Company remeasures the Notes at fair value at each reporting period, with changes being recorded within other (loss) income in the unaudited condensed consolidated statements of operations.

Upon consummation of the Series A Purchase Agreement, the Company allocated the total principal proceeds of $0.5 million between the Preferred Stock Liability and the fair-valued Notes and recorded a loss of $0.5 million in other (loss) income in the unaudited condensed consolidated statements of operations.

Pursuant to the terms of the Series A Purchase Agreement, and as approved by the Company’s stockholders at the Company’s 2015 Annual Meeting, the Company issued and sold to the Purchasers $2.0 million in shares of Series A Preferred Stock at the second closing that was held on July 14, 2015 (the “Second Closing”).

Secured Convertible Promissory Notes and Related Agreements

At the Second Closing, the Notes were automatically converted pursuant to their terms into that number of shares of Series A Preferred Stock equal to the principal amount of the Notes plus all accrued but unpaid interest thereon divided by the purchase price of the Series A Preferred Stock of $1.7003 per share (the “Purchase Price”).

Contemporaneously with the execution and delivery of the Series A Purchase Agreement and the issuance of the Notes by the Company to the Purchasers, the Company and the Purchasers entered into a Security Agreement (the “Security Agreement”), dated May 12, 2015, pursuant to which the Company granted to the Purchasers a security interest in substantially all of the Company’s assets, other than the Company’s intellectual property, to secure the Company’s obligations under the Notes. Pursuant to the terms of the Security Agreement, the Company’s intellectual property would have become subject to the security interest granted by the Company to the Purchasers upon repayment of all amounts owed under that certain Loan and Security Agreement by and among the Company, General Electric Capital Corporation (“GECC”) as Agent, the Lenders and the Guarantors dated as of February 10, 2012, as amended (“the “GECC Agreement”) referred as the “Term Loan” (See Note 4). Pursuant to a Subordination and Intercreditor Agreement by and among the Company, the Purchasers and GECC, dated May 12, 2015, entered into contemporaneously with the execution and delivery of the Series A Purchase Agreement, the Company’s payment obligations under the Notes were subordinated to the Company’s payment obligations under the GECC Agreement and the security interest granted by the Company to the Purchasers to secure the Company’s obligations under the Notes was subordinated to the security interest granted by the Company to GECC to secure the Company’s obligations under the GECC Agreement. In connection with the entry into the Series A Purchase Agreement, the Company and GECC amended the GECC Agreement, dated May 12, 2015, to, among other things, permit the Company to enter into the Series A Purchase Agreement and related agreements. Upon the conversion of the Notes into shares of Series A Preferred Stock at the Second Closing, the security interest granted under the Security Agreement was terminated.

The Second Closing was subject to the approval of the Company’s stockholders at the 2015 Annual Meeting in July 2015 and the satisfaction or waiver of other closing conditions. The Company’s stockholders approved the issuance of shares of Series A Preferred Stock, shares of Series A Preferred Stock issuable upon conversion of the Notes and common stock issuable upon conversion of Series A Preferred Stock, at the 2015 Annual Meeting held on July 7, 2015.

On July 14, 2015, the Company and the Purchasers entered into the First Amendment to the Series A Purchase Agreement (the “First Amendment”) pursuant to which the Company and the Purchasers agreed to extend the period of time following the Company’s 2015 Annual Meeting for the Second Closing to occur until July 14, 2015. At the Second Closing, pursuant to the terms of the Series A Purchase Agreement, the Company issued and sold to the Purchasers 1,176,262 shares of newly designated Series A Preferred Stock of the Company at the Purchase Price of $1.7003 per share for aggregate gross cash proceeds of approximately $2.0 million. In addition, at the Second Closing, the $500,000 in aggregate principal amount of Notes, plus accrued but unpaid interest, that the Company had issued to the Purchasers in the Initial Closing, converted into 298,181 shares of Series A Preferred Stock at the Purchase Price. Following the Second Closing in July 2015, the Company had issued an aggregate of 1,474,443 shares of Series A Preferred Stock, which remain outstanding and held by the Purchasers.

The shares of Series A Preferred Stock have the rights, preferences and privileges set forth in the Restated Certificate of Designations to the Company’s Restated Certificate of Incorporation (the “Certificate of Designations”) that was filed by the Company on August 18, 2015 with the Secretary of State of the State of Delaware. The rights, preferences and privileges of the Series A Preferred Stock are as follows:

Dividends

Holders of Series A Preferred Stock will be entitled to receive, out of funds legally available for the payment of dividends under Delaware law, cumulative dividends that accrue daily at an annual rate of 8%, compounded and payable quarterly in cash or in additional shares of Series A Preferred Stock at the election of each holder. The holders of Series A Preferred Stock will also be entitled to participate in cash dividends and in-kind distributions made on shares of common stock.

The Board of Directors has not declared any dividends on common or preferred stock. At September 30, 2015, the cumulative undeclared dividends on preferred stock total $41,000, and are included as a deduction in determining net loss per share attributable to common shareholders. The carrying value of the Series A Preferred Stock was not adjusted for the cumulative undeclared dividends as the Series A Preferred Stock is not probable of becoming redeemable.

Voting Rights

Holders of Series A Preferred Stock will be entitled to vote with the holders of the common stock on an as-converted basis, except that no holder of Series A Preferred Stock will be entitled to cast votes for the number of shares of common stock issuable upon conversion of the Series A Preferred Stock held by such holder that exceeds (subject to a proportionate adjustment in the event of a stock split, stock dividend, combination or other proportionate recapitalization) the quotient of (A) the aggregate purchase price paid by such holder for its Series A Preferred Stock, divided by (B) the greater of (i) $3.20 and (ii) the closing price of the common stock on the trading day immediately prior to the date its Series A Preferred Stock is issued, which was $1.40. In addition, prior to the conversion of the Series A Preferred Stock, the consent of the holders of at least a majority of the Series A Preferred Stock then outstanding, voting together as a single class, will be required for the Company to take certain actions, including, among other things: liquidating, dissolving or winding up the business and affairs of the Company or effecting any merger, consolidation or other liquidation event; amending, altering or repealing any provision of the Certificate of Incorporation, the Certificate of Designations or the Bylaws of the Company; creating or authorizing any class or series of capital stock ranking senior to or on parity with the Series A Preferred Stock or increasing the number of authorized shares of Series A Preferred Stock; purchasing, redeeming, paying or declaring dividends on any shares of capital stock of the Company, with certain exceptions; increasing or decreasing the size of the Board of Directors of the Company (the “Board”); and certain other actions.

Conversion Rights

Each share of Series A Preferred Stock is convertible into one share of common stock at any time at the option of each holder and automatically upon the written consent of the holders of a majority of the outstanding shares of Series A Preferred Stock. The conversion price will be subject to adjustment in connection with stock splits, combinations, dividends and other corporate transactions affecting the common stock. All other anti-dilution protections that had been provided to the Series A Preferred Stock upon issuance terminated following the Second Closing.

A contingent beneficial conversion feature was recognized during the three months ending September 30, 2015 as a result of the conversion price being adjusted from $1.7003 to $1.00 at the time of the Second Closing. The Company recorded $1.5 million relating to the contingent beneficial conversion as a deemed dividend. The $1.5 million was included within additional paid-in capital in the condensed consolidated financial statements, and reduced the carrying value of the Series A Preferred Stock. Since the Series A Preferred Stock has no stated redemption date and is immediately convertible, the $1.5 million deemed dividend was immediately accreted, resulting in an increase in the carrying value of the Series A Preferred Stock. The deemed dividend was included as a deduction in determining net loss per share attributable to common shareholders. The conversion price adjustment feature expired following the Second Closing.

Redemption Rights

All redemption rights that had been provided to the Series A Preferred Stock upon issuance terminated following the Second Closing.

Ranking

The Series A Preferred Stock will rank senior in preference and priority to the Company’s common stock and each other class or series of capital stock of the Company, except for any class or series of capital stock issued in compliance with the terms of the Restated Certificate of Designations.

Liquidation Preference

Upon liquidation, including deemed liquidations pursuant to a merger, consolidation or a sale of all or substantially all of the Company’s assets, the holders of Series A Preferred Stock will be entitled to be paid first out of any proceeds in an amount per share equal to the price at which shares of Series A Preferred Stock were sold in the Series A Preferred Stock financing, plus all accrued but unpaid dividends on each share of Series A Preferred Stock, and prior to payment of any amounts on the Company’s common stock. Thereafter, the holders of Series A Preferred Stock will also share pro rata on an as converted to common stock basis in payments made to the holders the Company’s common stock. Accordingly, the holders of the Series A Preferred Stock will be entitled to receive the proceeds out of any sale or liquidation of the Company before any such proceeds are paid to holders of the Company’s common stock and then share in any proceeds paid to holders of the Company’s common stock. As a result, only the sale or liquidation proceeds in excess of the liquidation preference plus accrued but unpaid dividends would be available for distribution to holders of the Company’s common stock.

The commissions and issuance costs associated with the Series A Preferred Stock financing were deducted from the carrying value of the Series A Preferred Stock, resulting in the carrying value of the Series A Preferred Stock being reduced below its liquidation value. The Company accretes the carrying value of the Series A Preferred Stock over the period from the date of issuance to the earliest redemption date using the effective interest method. During the nine months ending September 30, 2015, the Company recorded one month of accretion, totaling $56,000, at which point the Company ceased accretion as the Series A Preferred stock was not probable of becoming redeemable.

Board of Directors

Holders of Series A Preferred Stock will be entitled to nominate one director to the Board (the “Series A Director”). Subject to applicable law and stock exchange requirements, the Series A Director will be entitled to serve as a member of each committee of the Board. The rights to nominate a Series A Director will terminate if less than 20% of the shares of Series A Preferred Stock issued under the Securities Purchase Agreement dated May 12, 2015, as amended, by and between the Company and the Series A Holders are no longer outstanding.

Registration Rights

The Company shall comply with all federal and state laws, rules and regulations and applicable rules and regulations of the Exchange on which shares of the common are then listed. If any shares of common to be reserved for the purpose of conversion of Series A Preferred Stock require registration with or approval of any Person or group (as such term is defined in Section 13(d)(3) of the Exchange Act) under any federal or state law or the rules and regulations of the Exchange on which shares of the common stock are then listed before such shares may be validly issued or delivered upon conversion, then the Company will, as expeditiously as reasonably practicable, use commercially reasonable efforts to secure such registration or approval, as the case may be. So long as any common stock into which the of Series A Preferred Stock are then convertible is then listed on an Exchange, the Company will list and keep listed on any such Exchange, upon official notice of issuance, all shares of such common stock issuable upon conversion.

As the holders of the Series A Preferred Stock are entitled to receive liquidation preferences that other equity holders are not entitled to, the Company determined that the preferred stock should be classified as temporary equity in the condensed consolidated financial statements.

The Company reviews the rights and preferences of its equity securities for any changes in terms, rights or preferences to determine if such change is a modification or an extinguishment. The Company evaluates amendments to equity securities using a qualitative method which considers the business purpose for the amendment and whether it adds, deletes or significantly changes a substantive contractual term or the nature of the equity securities. An amendment that changes a substantive contractual term or fundamentally changes the nature of the share of preferred stock is considered an extinguishment. If considered an extinguishment, the Company accounts for the removal of the carrying value of the old securities and recognizes the new securities at their current fair value. An amendment that does not meet these criteria is a modification. If considered a modification, the Company estimates the fair value of the equity security pre- and post- modification and recognizes the incremental fair value, if any, resulting from the modified terms. During the nine months ending September 30, 2015, the Company determined that all changes to the terms of the Series A Preferred Stock resulting from amendments made to the Certificates of Designations were not substantive and should be accounted for as a modification. The amendments did not result in a material change to the fair value of the Series A Preferred Stock.

XML 30 R11.htm IDEA: XBRL DOCUMENT v3.3.0.814
Follow-on Public Offerings
9 Months Ended
Sep. 30, 2015
Follow-on Public Offerings
6. Follow-on Public Offerings

On April 8, 2014, the Company closed a follow-on underwritten public offering of 1,613,000 shares of its common stock, at an offering price of $6.20 per share, for gross proceeds of $10.0 million. The net offering proceeds received by the Company, after deducting underwriting discounts and commissions and expenses incurred in connection with the offering, were approximately $9.0 million.

On August 18, 2015, the Company closed on an underwritten public offering of (i) 2,315,654 Series A units, each consisting of one share of common stock and one half of a warrant to purchase one share of common stock, at a purchase price of $1.00 per Series A unit, and (ii) 184,346 Series B units, in lieu of Series A units, at a purchase price of $1.00 per Series B unit to those purchasers whose purchase of additional Series A units in the offering would result in the purchaser beneficially owning more than 9.99% of the Company’s outstanding common stock following the completion of the offering. Each Series B unit consists of one fully pre-funded warrant to purchase one share of common stock and one half of a warrant to purchase one share of common stock. The warrants (other than the fully pre-funded warrants) have an exercise price of $1.00 per share. The net offering proceeds received by the Company, after deducting discounts and commissions and expenses incurred with the offering were approximately $2.0 million.

XML 31 R23.htm IDEA: XBRL DOCUMENT v3.3.0.814
Summary of Changes in the Fair Value of Company's Secured Convertible Notes (Detail) - Convertible Debt Instrument - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2015
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]    
Beginning balance $ 929  
Proceeds from secured convertible note   $ 500
Loss on fair value adjustment 58 487
Conversion of secured convertible promissory notes $ (987) $ (987)
XML 32 R19.htm IDEA: XBRL DOCUMENT v3.3.0.814
Summary of Inventories (Detail) - USD ($)
$ in Thousands
Sep. 30, 2015
Dec. 31, 2014
Inventory [Line Items]    
Raw materials $ 45 $ 64
Finished goods 178 336
Total inventories $ 223 $ 400
XML 33 R15.htm IDEA: XBRL DOCUMENT v3.3.0.814
Fair Value of Financial Instruments (Tables)
9 Months Ended
Sep. 30, 2015
Convertible Debt Instrument  
Summary of Changes in Fair Value of Company' Level 3 Liability

The table below sets forth a summary of changes in the fair value of the Company’s secured convertible notes for the three and nine months ended September 30, 2015:

 

     Three Months Ended
September 30, 2015
     Nine Months Ended
September 30, 2015
 
     (in thousands)  

Beginning balance

   $ 929       $ —     

Proceeds from secured convertible note

     —           500   

Loss on fair value adjustment

     58         487   

Conversion of secured convertible notes

     (987      (987
  

 

 

    

 

 

 

Ending balance

   $ —         $ —     
  

 

 

    

 

 

 

 

Preferred Stock Liability  
Summary of Changes in Fair Value of Company' Level 3 Liability

The table below sets forth a summary of changes in the fair value of the Company’s level 3 liability (preferred stock liability) for the three and nine months ending September 30, 2015:

 

     Three Months Ended
September 30, 2015
     Nine Months Ended
September 30, 2015
 
     (in thousands)  

Beginning balance

   $ 31       $ —     

Loss on recognition of preferred stock liability

     —           79   

Gain on revaluation of preferred stock liability

     (31      (79
  

 

 

    

 

 

 

Ending balance

   $ —         $ —     
  

 

 

    

 

 

 

 

XML 34 R13.htm IDEA: XBRL DOCUMENT v3.3.0.814
Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2015
Product Revenues

Product Revenues

Product revenues are recognized when the following criteria have been met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred and risk of loss has passed; (iii) the seller’s price to the buyer is fixed or determinable; and (iv) collectability is reasonably assured.

The Company sells its products through supply agreements with laboratory testing services and diagnostic testing distributors and directly to hospitals and clinics. The Company recognizes revenue when products are received by customers, at which time both title and risk of loss have passed to the customers. The Company negotiates credit terms on a customer-by-customer basis and products are shipped at an agreed-upon price.

Revenue is recorded net of taxes collected from customers that are remitted to governmental authorities, with the collected taxes recorded as current liabilities until remitted to the relevant government authority. Freight costs billed to customers are recorded as revenue.

In the past the Company did not provide an allowance for doubtful accounts or a reserve for sales returns as the Company has not experienced any credit losses, and returns are only allowed for defects in workmanship. On June 7, 2015, Health Diagnostic Laboratory, Inc. (“HDL”), which is the Company’s largest customer of its BGM Galectin-3 ® Test, filed a voluntary petition for bankruptcy protection under Chapter 11 in the United States Bankruptcy Court for the Eastern District of Virginia, Richmond Division. In light of this filing the Company provided a provision for doubtful accounts of $151,000 in the second quarter of 2015. On September 11, 2015, True Health Diagnostics announced the acquisition of HDL, in a court-supervised auction has not yet filed a plan of liquidation or reorganization. Thus, it is uncertain what distribution will be made on account of allowed claims. Further, the court approved HDL’s request to extend the exclusive deadline by which HDL may file a plan of liquidation or reorganization until early 2016.

Product Fee Revenues

The Company recognizes product fee revenue when it receives quarterly test sales reporting and payments thereunder from its partners. The Company has entered into worldwide license, development and commercialization agreements with Abbott Laboratories, (“Abbott”), bioMérieux SA, (“bioMérieux”), Siemens Healthcare Diagnostics Inc., (“Siemens”), and Alere Inc., (“Alere”). As consideration for the rights and licenses granted by the Company to its partners, the licensees pay to the Company a product fee, as set forth in the respective agreements, for tests sold to third parties. To date, only Abbott and bioMérieux have paid product fees to the Company.

 

Product Fee Reclassification

Beginning in the third quarter of 2015, the Company began disclosing product fee revenue separately from product revenue. To maintain comparability, all previously reported product revenue figures in the accompanying unaudited condensed consolidated financial statements have been retroactively adjusted to break out the product fee revenue recognized during those periods. Management evaluated the amount and nature of the change and concluded that it was not material to either the previously reported annual or quarterly financial statement results of operations. Nonetheless, the Company has reclassified the historical statement of operations amounts included in this filing as follows (in thousands):

 

     As reported
Three months ended
September 30, 2014
     As reclassified
Three months ended
September 30, 2014
     As reported
Nine months ended
September 30, 2014
     As reclassified
Nine months ended
September 30, 2014
 

Product Revenues

   $ 695       $ 669       $ 2,233       $ 2,158   

Product Fee Revenues

     —           26         —           75   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Revenues

   $ 695       $ 695       $ 2,233       $ 2,233   
  

 

 

    

 

 

    

 

 

    

 

 

 
Inventory

Inventory

Inventory is stated at the lower of cost or market. Costs are determined under the first-in, first-out (FIFO) method. Inventories consisted of the following:

 

(in thousands)    September 30, 2015      December 31, 2014  

Raw materials

   $ 45       $ 64   

Finished goods

     178         336   
  

 

 

    

 

 

 

Total inventories

   $ 223       $ 400   
  

 

 

    

 

 

 
Net Loss Per Share Attributable to Common Shareholders

Net Loss Per Share Attributable to Common Shareholders

Basic and diluted net loss per share attributable to common shareholders is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. The Company applied the two-class method to calculate its basic and diluted net loss per share of common stock, as its convertible preferred stock, common stock, and warrants to purchase common stock are participating securities. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common shareholders. However, the two-class method does not impact the net loss per share of common stock as the Company was in a loss position for each of the periods presented, and neither preferred shareholders nor warrant holders participate in losses.

The following table summarizes the computation of basic and diluted net loss per share for the three and nine months ended September 30, 2015 and 2014:

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2015      2014      2015      2014  
     (in thousands, except share and per share data)  

Net loss

   $ (1,023    $ (2,397    $ (4,401    $ (6,744

Preferred stock dividend

     (41      —           (41      —     

Deemed dividend on beneficial conversion feature

     (1,507      —           (1,507      —     

Accretion of convertible preferred stock to liquidation value

     (56      —           (56      —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net loss attributable to common shareholders

   $ (2,627    $ (2,397    $ (6,005    $ (6,744

Weighted average number of shares - basic and diluted

     9,862,802         8,604,312         9,057,960         8,028,373   

Net loss per share attributable to common shareholders - basic and diluted

   $ (0.27    $ (0.28    $ (0.66    $ (0.84

As of September 30, 2015 and 2014, the following potential common shares were excluded from the computation of diluted net loss per share because they had an antidilutive impact due to the losses reported:

 

     September 30,  
     2015      2014  

Options to purchase common stock

     699,513         644,789   

Warrants to purchase common stock

     1,536,929         216,156   

XML 35 R14.htm IDEA: XBRL DOCUMENT v3.3.0.814
Significant Accounting Policies (Tables)
9 Months Ended
Sep. 30, 2015
Summary of Reclassified Amounts of Historical Statement of Operations

Nonetheless, the Company has reclassified the historical statement of operations amounts included in this filing as follows (in thousands):

 

     As reported
Three months ended
September 30, 2014
     As reclassified
Three months ended
September 30, 2014
     As reported
Nine months ended
September 30, 2014
     As reclassified
Nine months ended
September 30, 2014
 

Product Revenues

   $ 695       $ 669       $ 2,233       $ 2,158   

Product Fee Revenues

     —           26         —           75   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Revenues

   $ 695       $ 695       $ 2,233       $ 2,233   
  

 

 

    

 

 

    

 

 

    

 

 

 
Summary of Inventories

Inventory

Inventory is stated at the lower of cost or market. Costs are determined under the first-in, first-out (FIFO) method. Inventories consisted of the following:

 

(in thousands)    September 30, 2015      December 31, 2014  

Raw materials

   $ 45       $ 64   

Finished goods

     178         336   
  

 

 

    

 

 

 

Total inventories

   $ 223       $ 400   
  

 

 

    

 

 

 
Summary of Computation of Basic and Diluted Net Loss per Share

The following table summarizes the computation of basic and diluted net loss per share for the three and nine months ended September 30, 2015 and 2014:

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
     2015      2014      2015      2014  
     (in thousands, except share and per share data)  

Net loss

   $ (1,023    $ (2,397    $ (4,401    $ (6,744

Preferred stock dividend

     (41      —           (41      —     

Deemed dividend on beneficial conversion feature

     (1,507      —           (1,507      —     

Accretion of convertible preferred stock to liquidation value

     (56      —           (56      —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Net loss attributable to common shareholders

   $ (2,627    $ (2,397    $ (6,005    $ (6,744

Weighted average number of shares - basic and diluted

     9,862,802         8,604,312         9,057,960         8,028,373   

Net loss per share attributable to common shareholders - basic and diluted

   $ (0.27    $ (0.28    $ (0.66    $ (0.84
Common Shares Excluded from Computation of Diluted Net Loss per Share

As of September 30, 2015 and 2014, the following potential common shares were excluded from the computation of diluted net loss per share because they had an antidilutive impact due to the losses reported:

 

     September 30,  
     2015      2014  

Options to purchase common stock

     699,513         644,789   

Warrants to purchase common stock

     1,536,929         216,156   

 

XML 36 R16.htm IDEA: XBRL DOCUMENT v3.3.0.814
Description of Business and Basis of Presentation - Additional Information (Detail)
1 Months Ended 3 Months Ended 6 Months Ended 9 Months Ended 12 Months Ended 13 Months Ended
Aug. 18, 2015
USD ($)
shares
$ / shares
Jul. 08, 2015
shares
Jun. 30, 2015
USD ($)
Sep. 30, 2015
USD ($)
$ / shares
Sep. 30, 2014
USD ($)
Dec. 31, 2014
USD ($)
$ / shares
Sep. 30, 2015
USD ($)
$ / shares
$ / Patient
Sep. 30, 2014
USD ($)
Dec. 31, 2014
USD ($)
$ / shares
$ / Patient
Dec. 31, 2013
USD ($)
$ / Patient
Sep. 30, 2015
USD ($)
Employee
$ / shares
Jul. 14, 2015
$ / shares
May. 12, 2015
USD ($)
$ / shares
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Reverse stock split   On July 8, 2015, the Company effected a 1-for-4 reverse stock split of its common stock. All previously reported common stock share amounts in the accompanying financial statements and related notes have been retroactively adjusted to reflect the reverse stock split.                      
Common stock splits ratio | shares   0.25                      
Cash       $ 2,642,000 $ 6,313,000 $ 4,123,000 $ 2,642,000 $ 6,313,000 $ 4,123,000 $ 7,751,000 $ 2,642,000    
Loan facility           2,960,000     2,960,000        
Stockholders' deficit       (1,274,000)   $ 557,000 (1,274,000)   557,000   $ (1,274,000)    
Net loss       (1,023,000) $ (2,397,000)   (4,401,000) (6,744,000)          
Net cash flows used in operating activities             (2,550,000) (7,097,000)          
Cash for payments on term loan facility             2,984,000 3,360,000          
Reduction in workforce, percentage                     77.00%    
Number of employees eliminated | Employee                     17    
Number of employees remaining after restructuring activities | Employee                     5    
Severance payments and benefits continuation             98,000   $ 404,000        
Savings in employee salaries and benefits       2,400,000     2,400,000       $ 2,400,000    
Preferred stock issued, value       $ 2,594,000     $ 2,594,000       $ 2,594,000    
Preferred stock, par value | $ / shares       $ 0.001   $ 0.001 $ 0.001   $ 0.001   $ 0.001    
Sublease expiration date     Dec. 31, 2018                    
Short term rental basis, expected annualized savings     $ 240,000                    
Exercise price of warrants | $ / shares $ 1.00                        
Proceeds from public offering $ 2,000,000           $ 2,500,000 $ 9,238,000          
Percentage of common shares outstanding owned 9.99%                        
Series A                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Preferred stock issued, value       $ 2,000,000     2,000,000       $ 2,000,000   $ 2,000,000
Preferred stock sold, value       $ 2,000,000     $ 2,000,000       $ 2,000,000   $ 2,000,000
Preferred stock, par value | $ / shares                       $ 1.7003 $ 0.001
Purchase price | $ / shares       $ 1.40     $ 1.40       $ 1.40    
Series A Units                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Shares of common stock under public offering | shares 2,315,654                        
Purchase price | $ / shares $ 1.00                        
Series B Units                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Shares of common stock under public offering | shares 184,346                        
Purchase price | $ / shares $ 1.00                        
Total costs and operating expenses                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Sublease rental charges     $ 153,000                    
Research and development                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Severance payments and benefits continuation             $ 41,000   $ 128,000        
Selling and marketing                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Severance payments and benefits continuation             57,000   114,000        
General and administrative                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Severance payments and benefits continuation                 $ 162,000        
Employee Severance                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Payment for severance payments and benefits continuation           $ 277,000 225,000            
Common Stock | Series A Units                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Proportion of each unit of shares | shares 1                        
Common Stock | Series B Units                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Proportion of each unit of shares | shares 1                        
Warrants to purchase common stock | Series A Units                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Proportion of each unit of shares | shares 0.5                        
Warrants to purchase common stock | Series B Units                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Proportion of each unit of shares | shares 0.5                        
Secured convertible promissory notes                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Principal amount of secured convertible promissory notes issued and sold                         $ 500,000
Term loans                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Loan facility       $ 0     $ 0       $ 0    
Loan facility, maturity date             Jul. 14, 2015            
Centers for Medicare And Medicaid Services                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Reimbursed price per test | $ / Patient             29.93   30.01 17.80      
Centers for Medicare And Medicaid Services | Ohio                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Reimbursed price per test | $ / Patient             23.93            
Centers for Medicare And Medicaid Services | WEST VIRGINIA                          
Description Of Business Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]                          
Reimbursed price per test | $ / Patient             26.33            
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Common Shares Excluded From Computation of Diluted Net Loss Per Share (Detail) - shares
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Options to purchase common stock    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share 699,513 644,789
Warrants to purchase common stock    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share 1,536,929 216,156
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Commitments and Contingencies - Additional Information (Detail)
Sep. 30, 2015
USD ($)
Commitments and Contingencies [Line Items]  
Accrued other contingencies $ 0
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Condensed Consolidated Statements of Cash Flows - USD ($)
9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Cash flows from operating activities    
Net loss $ (4,401,000) $ (6,744,000)
Adjustments to reconcile net loss to net cash used in operating activities    
Depreciation and amortization 69,000 100,000
Stock-based compensation 630,000 489,000
Non-cash interest expense 79,000 164,000
Provision for doubtful accounts 151,000  
Loss on fair value of secured convertible note 487,000  
Loss on sale of property and equipment 64,000  
Changes in operating assets and liabilities    
Accounts receivable (130,000) 65,000
Inventory 177,000 101,000
Prepaid expenses and other assets 7,000 78,000
Accounts payable, accrued expenses and other liabilities 254,000 (1,349,000)
Deferred revenue and customer deposits 63,000 (1,000)
Net cash flows used in operating activities (2,550,000) (7,097,000)
Cash flows from investing activities    
Proceeds from the sale of property and equipment 13,000  
Net cash flows provided by investing activities 13,000  
Cash flows from financing activities    
Proceeds from public offering 2,500,000 9,238,000
Payments on term loan (2,984,000) (3,360,000)
Proceeds from ESPP purchases   2,000
Proceeds from the exercise of stock options   22,000
Proceeds from secured convertible note 500,000  
Proceeds from issuance of preferred stock 2,000,000  
Net cash flows provided by financing activities 1,056,000 5,659,000
Net decrease in cash (1,481,000) (1,438,000)
Cash, beginning of period 4,123,000 7,751,000
Cash, end of period 2,642,000 6,313,000
Supplemental disclosure of cash flow information    
Cash paid for interest 81,000 433,000
Supplemental schedule of non-cash financing activities    
Conversion of convertible notes payable to preferred stock 987,000  
Conversion of interest to preferred stock 7,000  
Deemed dividend on beneficial conversion feature 1,507,000  
Accretion of convertible preferred stock to liquidation value 56,000  
Common Stock    
Cash flows from financing activities    
Costs related to issuance of stock (504,000) $ (243,000)
Preferred Stock    
Cash flows from financing activities    
Costs related to issuance of stock $ (456,000)  
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Commitments and Contingencies
9 Months Ended
Sep. 30, 2015
Commitments and Contingencies
5. Commitments and Contingencies

From time to time, the Company may be subject to various legal proceedings and claims arising in the ordinary course of business. The Company assesses contingencies to determine the degree of probability and range of possible loss for potential accrual in its financial statements. An estimated loss contingency is accrued in the financial statements if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

No amounts related to contingencies are accrued at September 30, 2015, as there are no ongoing proceedings.

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Follow-on Public Offerings - Additional Information (Detail)
$ / shares in Units, $ in Thousands
9 Months Ended
Aug. 18, 2015
USD ($)
shares
$ / shares
Apr. 08, 2014
USD ($)
$ / shares
shares
Sep. 30, 2015
USD ($)
Sep. 30, 2014
USD ($)
Equity [Line Items]        
Gross proceeds offering | $ $ 2,000   $ 2,500 $ 9,238
Exercise price of warrants | $ / shares $ 1.00      
Percentage of common shares outstanding owned 9.99%      
Series A Units        
Equity [Line Items]        
Shares of common stock under public offering 2,315,654      
Purchase price | $ / shares $ 1.00      
Series A Units | Common Stock        
Equity [Line Items]        
Proportion of each unit of shares 1      
Series A Units | Warrants to purchase common stock        
Equity [Line Items]        
Proportion of each unit of shares 0.5      
Series B Units        
Equity [Line Items]        
Shares of common stock under public offering 184,346      
Purchase price | $ / shares $ 1.00      
Series B Units | Common Stock        
Equity [Line Items]        
Proportion of each unit of shares 1      
Series B Units | Warrants to purchase common stock        
Equity [Line Items]        
Proportion of each unit of shares 0.5      
Underwritten Public Offering        
Equity [Line Items]        
Shares of common stock under public offering   1,613,000    
Common stock offering price | $ / shares   $ 6.20    
Gross proceeds offering | $   $ 10,000    
Offering proceeds net of underwriting discounts, commissions and expenses | $   $ 9,000    
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Summary of Computation of Basic and Diluted Net Loss Per Share (Detail) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2015
Sep. 30, 2014
Sep. 30, 2015
Sep. 30, 2014
Schedule Of Computation Of Basic And Diluted Earnings Per Common Share [Line Items]        
Net loss $ (1,023) $ (2,397) $ (4,401) $ (6,744)
Preferred stock dividend (41)   (41)  
Deemed dividend on beneficial conversion feature (1,507)   (1,507)  
Accretion of convertible preferred stock to liquidation value (56)   (56)  
Net loss attributable to common shareholders $ (2,627) $ (2,397) $ (6,005) $ (6,744)
Weighted average number of shares - basic and diluted 9,862,802 8,604,312 9,057,960 8,028,373
Net loss per share attributable to common shareholders - basic and diluted $ (0.27) $ (0.28) $ (0.66) $ (0.84)