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Description of Business, Basis of Presentation, Acquisition, Pending Acquisition, Public Offerings and Reverse Stock Splits
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6 Months Ended |
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Jun. 30, 2014
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Description of Business, Basis of Presentation, Acquisition, Pending Acquisition, Public Offerings and Reverse Stock Splits |
Description of Business, Basis of Presentation, Acquisition, Pending Acquisition, Public Offerings and Reverse Stock Splits
We are a diagnostics company focused on developing and commercializing proprietary genomic tests and services to improve the diagnosis, prognosis and response to treatment of cancer (theranosis). Our proprietary tests target cancers where prognosis information is critical and where predicting treatment outcomes using currently available techniques is limited. These cancers include hematological, urogenital and HPV-associated cancers. We seek to provide our tests and services to oncologists and pathologists at hospitals, cancer centers and physician offices, as well as to biopharmaceutical companies and clinical research organizations for their clinical trials.
Acquisition - Gentris Corporation
On July 15, 2014, we entered into an Asset Purchase Agreement (the “Agreement”) to purchase substantially all of the assets of Gentris Corporation, a Delaware corporation (“Gentris”), with its principal place of business in North Carolina. The transaction closed on July 16, 2014.
Gentris provides genomic testing and pharmacogenomics services to half of the top ten biopharma companies globally and has participated and performed genomic analysis for over 1,000 clinical trials. Gentris has operations in Raleigh (Research Triangle Park), North Carolina and Shanghai, China in state-of-the-art GLP, CLIA and FDA-compliant facilities. It is contemplated that Gentris will become fully integrated with our operations. Gentris has 39 employees and 28,000 square feet of laboratory space.
The initial acquisition price of Gentris was (i) $3.25 million in cash (subject to potential minor reduction based on obligations of Gentris due at closing), plus (ii) a number of our shares of common stock equal to $1.50 million divided by the volume weighted average price of our common stock on The Nasdaq Capital Market for the five days immediately preceding the closing date of this transaction, plus (iii) a potential earn-out of up to $1.50 million over the next calendar year, which earn-out is payable in cash or shares of our common stock at our option, and is based upon a formula that provides for an additional amount starting at $300,000 for revenues of $4.75 million, up to an additional amount of $1.5 million for revenues of $8.55 million, plus (iv) a potential payment to be made in connection with the termination of Merck’s biorepository relationship with Gentris, based upon exit fees to be received by Gentris from Merck. The volume weighted average price of our common stock on The Nasdaq Capital Market for the five days preceding closing was $10.1459 per share, causing the number of shares of common stock issued in the acquisition to amount to an aggregate of 147,843 shares. The source of the $3.25 million of cash was the Company’s working capital. The transaction was treated as an asset purchase. We incurred a finder's fee of $147,500 related to the transaction, $125,000 of which was paid in July, 2014.
As of June 30, 2014, we had a loan receivable from Gentris in the amount of $300,000 which is included in other assets in the Consolidated Balance Sheet . The loan was made on May 23, 2014 and bore interest at 4%. The loan was converted to an advance on the purchase price at time of close.
Pending Acquisition - Bioserve India
On May 12, 2014, we entered into two related agreements whereby we agreed to acquire BioServe BioTechnologies (India) Private Limited, an Indian corporation (“BioServe”).
BioServe is a leading genomic service and next-generation sequencing company founded in 2002 serving both the research and clinical markets and based in Hyderabad, India. It has approximately 26 employees. If the transaction is consummated, we believe we will be able to access the Indian healthcare market. The acquisition provides the Company with an infrastructure in India for developing lower cost manufacturing of probes and kits including probes and kits used for our proprietary FHACT test, a center for remote genetic analysis of US cases at lower cost and access to one of the fastest-growing molecular and clinical diagnostic markets in the world. BioServe will continue to serve biotechnology and biopharmaceutical companies, diagnostic companies and research hospitals, including those owned or operated by the Indian government, as well as seek to expand its customer base.
The parties to the first agreement (the “India Agreement”) are the Company, Ramakishna V. Modali (the current general manager of BioServe, “Modali”), Ventureast Trustee Company Pvt Ltd and affiliates, its principal shareholder (“Ventureast”), and certain other shareholders residing in India all of whom in the aggregate own approximately 74% of BioServe. The parties to the second share purchase agreement (the “US Agreement”) are the Company and BioServe Biotechnologies LTD, a Maryland corporation and an affiliate of BioServe which owns approximately 15% of BioServe, with the majority of the other outstanding shares held by the BioServe Employee Stock Ownership Plan which will remain in place. The aggregate purchase price is approximately $1.9 million payable to the different shareholders of BioServe as follows: (i) Ventureast will receive a payment equivalent to the cash value of 84,278 shares of the Company’s common stock at the time of payment, payable in 30 months or sooner if the Company effects a public offering of its common stock prior to that time, (ii) approximately $100,000 is payable in cash to various other shareholders, and (iii) approximately 8,687 shares will be issued to various other shareholders under the US Agreement. The Company will also assume approximately $170,000 in indebtedness. The Company formed a subsidiary in India to which it assigned its rights to purchase shares under the India Agreement. Certain payments to the BioServe shareholders will be subject to set-off in the event of claims for indemnification for any breaches of any representations or warranties in the agreement.
As a condition of closing Mr. Modali has agreed to be employed by the Company. To induce him to enter into this agreement, he will receive a restricted stock grant of approximately 22,683 shares of the Company’s common stock that will be fully vested upon issuance. The shares will be subject to customary sales restrictions under United States Securities regulations and subject to set-off as a part of the warranties in the agreement.
The consummation of the transactions is subject to various conditions, including certain filings to be made and approvals received in India; the absence of any material adverse effect with respect to BioServe; the absence of any order or law preventing consummation of the transactions; and other legal and regulatory requirements.
Either party may terminate the agreements and the transactions contemplated thereby if the Closing has not occurred by the end of August, 2014. The Company anticipates closing in the third quarter of 2014.
Public Offerings and Reverse Stock Splits
In April 2013, we sold shares of our common stock in an initial public offering (“IPO”). Additionally, we sold shares of our common stock in public offerings in August 2013 and in October 2013. Refer to Note 6 for further discussion of these offerings.
On February 8, 2013, we filed a charter amendment with the Secretary of State for the State of Delaware and effected a 1-for-2 reverse stock split of our common stock. On March 1, 2013, we filed another charter amendment with the Secretary of State for the State of Delaware and effected a 1-for-2.5 reverse stock split of our common stock. All shares and per share information referenced throughout the consolidated financial statements reflect both reverse splits.
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