Annual report pursuant to Section 13 and 15(d)

Acquisition of Response Genetics

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Acquisition of Response Genetics
12 Months Ended
Dec. 31, 2016
Business Combinations [Abstract]  
Acquisition of Response Genetics
Acquisition of Response Genetics

On October 9, 2015, we acquired substantially all the assets and assumed certain liabilities of Response Genetics, with its principal place of business in California, in a transaction valued at approximately $12.9 million, comprised of $7.5 million in cash and 788,584 shares of the Company’s common stock, with the common stock being valued at $5.4 million.
Response Genetics was a life sciences company engaged in the research and development of clinical diagnostic tests for cancer. Response Genetics generated revenues primarily from sales of its ResponseDX® diagnostic tests, which Response Genetics launched in 2008, and by providing clinical trial testing services to pharmaceutical companies.

The transaction is being accounted for using the acquisition method of accounting for business combinations in accordance with GAAP. Under this method, the total consideration transferred to consummate the acquisition is being allocated to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values as of the closing date of the acquisition. The acquisition method of accounting requires extensive use of estimates and judgments to allocate the consideration transferred to the identifiable tangible and intangible assets acquired and liabilities assumed.

Goodwill arising from the acquisition consists largely of a trained workforce in place and expected synergies from new lines of business. Goodwill recorded in conjunction with the acquisition is deductible for income tax purposes. Business transactions expense of approximately $890,000 incurred in connection with the acquisition was expensed as incurred.

The final allocation of the purchase price of the fair value of the assets acquired and the liabilities assumed as of October 9, 2015 is as follows (in thousands):

 
Amount
Accounts receivable
$
344

Prepaid expenses and other current assets
561

Fixed assets
2,254

Intangible assets
1,246

Goodwill
8,842

Current liabilities
(194
)
Obligations under capital lease
(122
)
Total purchase price
$
12,931



The results of operations for the year ended December 31, 2015 include the operations of Response Genetics from October 9, 2015 with revenues of approximately $1,751,000. The net loss of Response Genetics cannot be determined, as its operations were integrated with Cancer Genetics.