IDXG 10-Q
Interpace Biosciences, Inc. (IDXG)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
| (Exact name of registrant as specified in its charter) |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices and zip code) |
| (Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None | N/A | N/A |
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.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
| Smaller reporting company | ||
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
| Class | Shares Outstanding May 2, 2025 | |
| Common Stock, par value $ per share |
INTERPACE BIOSCIENCES, INC.
FORM 10-Q FOR PERIOD ENDED MARCH 31, 2025
TABLE OF CONTENTS
2
PART I. FINANCIAL INFORMATION
INTERPACE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right of use assets | ||||||||
| Other long-term assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued salary and bonus | ||||||||
| Other accrued expenses | ||||||||
| Note payable at fair value | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Operating lease liabilities, net of current portion | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 8) | ||||||||
| Stockholders’ deficit: | ||||||||
| Redeemable preferred stock, $ par value; shares authorized, shares Series C issued and outstanding, respectively | ||||||||
| Common stock, $ par value; shares authorized; and shares issued, respectively; and shares outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock, at cost ( and shares, respectively) | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
INTERPACE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except for per share data)
| For The Three Months | ||||||||
| Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue, net | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Sales and marketing | ||||||||
| Research and development | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Operating income from continuing operations | ||||||||
| Interest accretion expense | ( | ) | ||||||
| Note payable interest | ( | ) | ( | ) | ||||
| Other income (expense), net | ( | ) | ||||||
| Income from continuing operations before tax | ||||||||
| Provision for income taxes | ||||||||
| Income from continuing operations | ||||||||
| Loss from discontinued operations, net of tax | ( | ) | ( | ) | ||||
| Net income | $ | $ | ||||||
| Basic income (loss) per share of common stock: | ||||||||
| From continuing operations | $ | $ | ||||||
| From discontinued operations | ( | ) | ( | ) | ||||
| Net income (loss) per basic share of common stock | $ | $ | ||||||
| Diluted income (loss) per share of common stock: | ||||||||
| From continuing operations | $ | $ | ||||||
| From discontinued operations | ( | ) | ( | ) | ||||
| Net income (loss) per diluted share of common stock | $ | $ | ||||||
| Weighted average number of common shares and common share equivalents outstanding: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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INTERPACE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(unaudited, in thousands)
| Common Stock | Treasury Stock | Additional Paid in | Accumulated | |||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Total | ||||||||||||||||||||||
| Balance -December 31, 2023 | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||
| Issuance of common stock | - | ( |
) | |||||||||||||||||||||||||
| Treasury stock purchased | - | ( |
) | ( |
) | |||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance -March 31, 2024 | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||
| Balance -December 31, 2024 | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||
| Issuance of common stock | - | |||||||||||||||||||||||||||
| Treasury stock purchased | - | ( |
) | ( |
) | |||||||||||||||||||||||
| Series C issuance costs | - | - | ( |
) | ( |
) | ||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Balance -March 31, 2025 | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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INTERPACE BIOSCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
| For The Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash Flows From Operating Activities | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Interest accretion expense | ||||||||
| Amortization of deferred financing fees | ||||||||
| Stock-based compensation | ||||||||
| Bad debt expense reversal | ( | ) | ||||||
| Credit loss expense | ||||||||
| Change in fair value of note payable | ( | ) | ||||||
| Amortization on operating lease right of use asset | ||||||||
| Other changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Other current assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued salaries and bonus | ( | ) | ( | ) | ||||
| Other accrued expenses | ( | ) | ( | ) | ||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Long-term liabilities | ||||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash Flows From Investing Activity | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows From Financing Activities | ||||||||
| Payments made on note payable | ( | ) | ( | ) | ||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net decrease in cash and cash equivalents | ( | ) | ( | ) | ||||
| Cash and cash equivalents from continuing operations– beginning | ||||||||
| Cash and cash equivalents from discontinued operations– beginning | ||||||||
| Cash and cash equivalents – beginning | $ | $ | ||||||
| Cash and cash equivalents from continuing operations– ending | $ | $ | ||||||
| Cash and cash equivalents from discontinued operations– ending | ||||||||
| Cash and cash equivalents – ending | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
INTERPACE BIOSCIENCES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(Tabular information in thousands, except per share amounts)
1. OVERVIEW
Nature of Business
Interpace Biosciences, Inc. (“Interpace” or the “Company”) is a company that provides molecular diagnostics, bioinformatics and pathology services for evaluation of risk of cancer by leveraging the latest technology in personalized medicine for improved patient diagnosis and management. The Company develops and commercializes genomic tests and related first line assays principally focused on early detection of patients with indeterminate biopsies and at high risk of cancer using the latest technology.
2. BASIS OF PRESENTATION
The accompanying unaudited interim condensed consolidated financial statements and related notes (the “Interim Financial Statements”) should be read in conjunction with the consolidated financial statements of the Company and its wholly-owned subsidiaries (Interpace Diagnostics Lab Inc., Interpace Diagnostics Corporation, and Interpace Diagnostics, LLC), and related notes as included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities & Exchange Commission (“SEC”) on March 31, 2025 and as amended on April 28, 2025.
The Interim Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial reporting and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The Interim Financial Statements include all normal recurring adjustments that, in the judgment of management, are necessary for a fair presentation of such interim financial statements. Discontinued operations include the Company’s wholly owned subsidiaries: Group DCA, LLC, InServe Support Solutions; and TVG, Inc., its Commercial Services business unit, which was sold on December 22, 2015 and its Interpace Pharma Solutions business which was sold on August 31, 2022. All significant intercompany balances and transactions have been eliminated in consolidation. Operating results for the three-month period ended March 31, 2025 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2025.
3. LIQUIDITY
In October 2021, the Company entered into
an $
Further, along with many laboratories, the Company will be negatively impacted by Local Coverage Determination (“LCD”) L39365, which was finalized on April 24, 2025 by our local Medicare Administrative Contractor, Novitas. This LCD, which governs “Genetic Testing for Oncology,” resulted in the loss of Medicare coverage for one of our molecular tests, PancraGEN®. On June 5, 2023, the Company announced that Novitas issued the final LCD of Genetic Testing for Oncology (L39365) which, if finalized, would have established non-coverage for the Company’s widely used PancraGEN® test effective July 17, 2023. On July 6, 2023, Novitas announced that it would not be implementing the final Genetic Testing for Oncology LCD (L39365) as scheduled on July 17, 2023. Novitas then issued a new virtually identical proposed LCD affecting the same companies and tests and reaching the same conclusions as noted in the previously rescinded LCD on July 27, 2023. In response, the Company participated in a public meeting presentation and submitted detailed written comments supporting the use of PancraGEN®. On July 29, 2024, the Company announced that the Center for Medicare and Medicaid Services (“CMS”) granted Novitas an undefined extension to the final decision for the LCD. As a result, the Company was able to continue offering PancraGEN® and the related Point2® fluid chemistry tests for amylase, CEA, and glucose for all of 2024.
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On January 9, 2025, the Company announced the new LCD established non-coverage for its PancraGEN® test, and that it would stop offering the test and would not accept specimens for first-line fluid chemistry and PancraGEN® testing after February 7, 2025. As a result of the established non-coverage for PancraGEN®, the Company announced, in January 2025, that its board of directors had approved a restructuring and cost-savings plan to reduce operating costs and better align its workforce with the loss of PancraGEN® (the “Restructuring Plan”).
On January 27, 2025, the Company announced that CMS had directed its Medicare Administrative Contractors, Novitas and First Coast Service Options, Inc., to delay implementation of the Genetic Testing for Oncology LCD (L39365), from February 23, 2025 until April 24, 2025. On April, 24, 2025, the Company announced that the LCD would take effect immediately and that specimens for first-line fluid chemistry and PancraGEN® testing will not be accepted by the Company after May 2, 2025. On April 25, 2025, the Company announced implementation of its previously approved Restructuring Plan. The Company expects the implementation of the Restructuring Plan to be substantially completed by the end of the second quarter of 2025.
Under the Restructuring Plan, the Company is reducing its workforce and impacted employees will be eligible to receive
severance benefits. The Company expects to incur severance costs in the range of $
For the three months ended March 31, 2025,
the Company had operating income from continuing operations of $
The Company intends to meet its ongoing capital needs by using its available cash, as well as through targeted margin improvement; collection of accounts receivable; containment of costs; and the potential use of other financing options and other strategic alternatives.
The Company continues to explore various strategic alternatives, dilutive and non-dilutive sources of funding, including equity and debt financings, strategic alliances, business development and other sources in order to provide additional liquidity. With the delisting of its common stock, par value $ per share (“Common Stock”), from Nasdaq in February 2021, the Company’s ability to raise additional capital on terms acceptable to it has been adversely impacted. There can be no assurance that the Company will be successful in obtaining such funding on terms acceptable to it.
With the Company’s continued improvement in operating performance, as of the date of this filing, even with the loss of reimbursement coverage of PancraGEN®, the Company anticipates that current cash and cash equivalents and forecasted cash receipts will be sufficient to meet its anticipated cash requirements through the next twelve months from the date of the filing of this report.
4. DISCONTINUED OPERATIONS
Liabilities classified as discontinued operations as of both March 31, 2025 and December 31, 2024 consists of accrued expenses which are liabilities related to the former Commercial Services business unit.
The table below presents the significant components of its former discontinued operations results included within loss from discontinued operations, net of tax in the condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024.
| For The Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Loss from discontinued operations | $ | $ | ||||||
| Income tax expense | ||||||||
| Loss from discontinued operations, net of tax | $ | ( | ) | $ | ( | ) | ||
There was
8
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management’s estimates are based on historical experience, facts and circumstances available at the time, and various other assumptions that are believed to be reasonable under the circumstances. Significant estimates include accounting for valuation allowances related to deferred income taxes, contingent consideration, allowances for credit losses, revenue recognition, unrecognized tax benefits, and asset impairments involving intangible assets. The Company periodically reviews these matters and reflects changes in estimates in earnings as appropriate. Actual results could materially differ from those estimates.
Revenue Recognition
We derive our revenues from the performance of proprietary assays or tests. The Company’s performance obligation is fulfilled upon the completion, review and release of test results to the customer. We subsequently bill third-party payers or direct-bill payers for the tests performed. Under Accounting Standards Codification 606, revenue is recognized based on the estimated transaction price or net realizable value, which is determined based on historical collection rates by each payer category for each proprietary test offered by the Company. To the extent the transaction price includes variable consideration, for all third party and direct-bill payers and proprietary tests, we estimate the amount of variable consideration that should be included in the transaction price using the expected value method based on historical experience.
We regularly review the ultimate amounts received from the third-party and direct-bill payers and related estimated reimbursement rates and adjust the net realizable values (“NRVs”) and related contractual allowances accordingly. If actual collections and related NRVs vary significantly from our estimates, we will adjust the estimates of contractual allowances, which affects net revenue in the period such variances become known.
Financing and Payment
For non-Medicare claims, our payment terms vary by payer category. Payment terms for direct-payers in our clinical services are typically thirty days. Commercial third-party-payers are required to respond to a claim within a time period established by their respective state regulations, generally between thirty to sixty days. However, payment for commercial third-party claims may be subject to a denial and appeal process, which could take up to two years in some instances where multiple appeals are submitted. The Company generally appeals all denials from commercial third-party payers. We bill Medicare directly for tests performed for Medicare patients and must accept Medicare’s fee schedule for the covered tests as payment in full.
9
Costs to Obtain or Fulfill a Customer Contract
Sales commissions are expensed in the period in which they have been earned. These costs are recorded in sales and marketing expense in the condensed consolidated statements of operations.
Accounts Receivable
The Company’s accounts receivable represent unconditional rights to consideration and are generated using its clinical services. The Company’s clinical services are fulfilled upon completion of the test, review and release of the test results. In conjunction with fulfilling these services, the Company bills the third-party payer or direct-bill payer. Contractual adjustments represent the difference between the list prices and the reimbursement rates set by third-party payers, including Medicare, commercial payers, and amounts billed to direct-bill payers. Specific accounts may be written off after several appeals, which in some cases may take longer than twelve months.
Leases
The Company determines if an arrangement contains a lease in whole or in part at the inception of the contract. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. All leases with terms greater than twelve months result in the recognition of a ROU asset and a liability at the lease commencement date based on the present value of the lease payments over the lease term. Unless a lease provides all of the information required to determine the implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments. We use the implicit interest rate in the lease when readily determinable.
Our lease terms include all non-cancelable periods and may include options to extend (or to not terminate) the lease when it is reasonably certain that we will exercise that option. Leases with terms of twelve months or less at the commencement date are expensed on a straight-line basis over the lease term and do not result in the recognition of an asset or liability. See Note 7, Leases.
Other Current Assets
Other current assets consisted of the following as of March 31, 2025 and December 31, 2024:
| March 31, 2025 | December 31, 2024 | |||||||
| Lab supplies | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Other | ||||||||
| Total other current assets | $ | $ | ||||||
10
A reconciliation of the number of shares of Common Stock, par value $ per share, used in the calculation of basic and diluted income (loss) per share for the three- month periods ended March 31, 2025 and 2024 is as follows:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Basic weighted average number of common shares | ||||||||
| Potential dilutive effect of stock-based awards | ||||||||
| Dilutive effect of preferred stock | ||||||||
| Diluted weighted average number of common shares | ||||||||
For the three- month periods ended March 31, 2025 and 2024, and the following outstanding stock-based awards were excluded from the computation of the effect of dilutive securities on income (loss) per share for the following periods as they would have been anti-dilutive (rounded to thousands):
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Options | ||||||||
| Restricted stock units (RSUs) | ||||||||
6. FAIR VALUE MEASUREMENTS
Cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to their relative short-term nature. The Company’s financial liabilities reflected at fair value in the condensed consolidated financial statements include contingent consideration, warrant liability and note payable. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based upon observable inputs used in the valuation techniques, the Company is required to provide information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values into three broad levels as follows:
| Level 1: | Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities. | |
| Level 2: | Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities. | |
| Level 3: | Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. |
11
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The valuation methodologies used for the Company’s financial instruments measured on a recurring basis at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, are set forth in the tables below:
| As of March 31, 2025 | Fair Value Measurements | |||||||||||||||||||
| Fair | As of March 31, 2025 | |||||||||||||||||||
| Amount | Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Note payable: | ||||||||||||||||||||
| Term Loan | ||||||||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
| As of December 31, 2024 | Fair Value Measurements | |||||||||||||||||||
| Carrying | Fair | As of December 31, 2024 | ||||||||||||||||||
| Amount | Value | Level 1 | Level 2 | Level 3 | ||||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Note payable: | ||||||||||||||||||||
| Term Loan | $ | $ | $ | $ | $ | |||||||||||||||
| $ | $ | $ | $ | $ | ||||||||||||||||
In connection with the Term Loan, the Company records the loan at fair value. The fair value of the loan is determined by a probability-weighted approach regarding the loan’s change in control feature. See Note 13, Notes Payable, for more details. The fair value measurement is based on the estimated probability of a change in control and thus represents a Level 3 measurement.
A roll forward of the carrying value of the Term Loan to March 31, 2025 is as follows:
| Adjustment to Fair Value/ | ||||||||||||||||||||
| December 31, 2024 | Payments | Accretion/Interest Accrued | Mark to Market | March 31, 2025 | ||||||||||||||||
| Term Loan | $ | | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||
| $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||
Certain of the Company’s non-financial assets, such as other intangible assets, are measured at fair value on a nonrecurring basis when there is an indicator of impairment and recorded at fair value only when an impairment charge is recognized.
12
7. LEASES
The table below presents the lease-related assets and liabilities recorded in the Condensed Consolidated Balance Sheet:
| Classification on the Balance Sheet | March 31, 2025 | December 31, 2024 | ||||||||
| Assets | ||||||||||
| Operating lease assets | Operating lease right of use assets | |||||||||
| Total lease assets | $ | $ | ||||||||
| Liabilities | ||||||||||
| Current | ||||||||||
| Operating lease liabilities | ||||||||||
| Total current lease liabilities | $ | $ | ||||||||
| Noncurrent | ||||||||||
| Operating lease liabilities | Operating lease liabilities, net of current portion | |||||||||
| Total long-term lease liabilities | ||||||||||
| Total lease liabilities | $ | $ | ||||||||
The weighted average remaining lease term
for the Company’s operating leases was
The table below reconciles the cash flows to the lease liabilities recorded on the Company’s Condensed Consolidated Balance Sheet as of March 31, 2025:
| Operating Leases | ||||
| 2025 - remaining nine months | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Total minimum lease payments | ||||
| Less: amount of lease payments representing effects of discounting | ||||
| Present value of future minimum lease payments | ||||
| Less: current obligations under leases | ||||
| Long-term lease obligations | $ | |||
8. COMMITMENTS AND CONTINGENCIES
Litigation
From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. In addition to the estimated loss, the recorded liability includes probable and estimable legal costs associated with the claim or potential claim. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. There is no pending litigation involving the Company at this time.
13
Due to the nature of the businesses in which the Company is engaged, it is subject to certain risks. Such risks include, among others, risk of liability for personal injury or death to persons using products or services that the Company promotes or commercializes. There can be no assurance that substantial claims or liabilities will not arise in the future due to the nature of the Company’s business activities. There is also the risk of employment related litigation and other litigation in the ordinary course of business.
The Company could also be held liable for errors and omissions of its employees in connection with the services it performs that are outside the scope of any indemnity or insurance policy. The Company could be materially adversely affected if it were required to pay damages or incur defense costs in connection with a claim that is outside the scope of an indemnification agreement; if the indemnity, although applicable, is not performed in accordance with its terms; or if the Company’s liability exceeds the amount of applicable insurance or indemnity.
9. OTHER ACCRUED EXPENSES
Other accrued expenses consisted of the following as of March 31, 2025 and December 31, 2024:
| March 31, 2025 | December 31, 2024 | |||||||
| Operating lease liability | ||||||||
| Accrued sales and marketing | ||||||||
| Accrued lab costs | ||||||||
| Accrued professional fees | ||||||||
| Taxes payable | ||||||||
| All others | ||||||||
| Total other accrued expenses | $ | $ | ||||||
Historically,
There were stock option awards issued in the three months ended March 31, 2025 and March 31, 2024.
The Company recognized approximately $ and $ million of stock-based compensation expense within continuing operations during the three-month periods ended March 31, 2025 and 2024, respectively. The following table has a breakout of stock-based compensation expense from continuing operations by line item.
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cost of revenue | $ | $ | ||||||
| Sales and marketing | ||||||||
| General and administrative | ||||||||
| Total stock compensation expense | $ | $ | ||||||
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11. INCOME TAXES
Generally, accounting standards require companies to provide for income taxes each quarter based on their estimate of the effective tax rate for the full year. The authoritative guidance for accounting for income taxes allows use of the discrete method when it provides a better estimate of income tax expense. Due to the Company’s valuation allowance position, it is the Company’s position that the discrete method provides a more accurate estimate of income tax expense and therefore income tax expense for the current quarter has been presented using the discrete method. As the year progresses, the Company refines its estimate based on the facts and circumstances by each tax jurisdiction. The following table summarizes income tax expense on income from continuing operations and the effective tax rate for the three- month periods ended March 31, 2025 and 2024:
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Provision for income tax | $ | $ | ||||||
| Effective income tax rate | % | % | ||||||
Income tax expense for the three months ended March 31, 2025 was primarily due to state and federal income taxes. Income tax expense for the three months ended March 31, 2024 was primarily due to Texas franchise taxes.
Other long-term liabilities consisted of uncertain tax positions as of March 31, 2025 and December 31, 2024.
12. SEGMENTS
The Company operates and manages its business as a single reporting segment. The business provides esoteric molecular diagnostic testing, and pathology services to aid physicians in their evaluation of cancer risk in patients with indeterminate biopsies and a perceived high risk of cancer from clinical features. We develop and commercialize genomic tests and related first-line assays that can personalize medicine to help improve patient diagnosis and management. The Company’s chief operating decision maker (“CODM”) is the chief executive officer.
The CODM assesses performance for the segment and decides how to allocate resources based on consolidated net income that is also reported on the consolidated statements of operations. The monitoring of budgeted versus actual results is used in assessing performance of the segment and in establishing resource allocation across the organization.
The measure of segment assets is reported on the consolidated balance sheet as total consolidated assets. All the Company’s long-lived assets are located in the United States. The accounting policies of the segment are the same as those described in Note 1, Nature of Business and Significant Accounting Policies included in our Annual Report on Form 10-K.
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The following table presents reportable segment profit and loss, including significant expense categories, attributable to the Company’s reportable segment for the periods presented:
| For The Three Months | ||||||||
| Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue, net: | $ | $ | ||||||
| Less: | ||||||||
| Cost of revenue: | ||||||||
| Fixed | ||||||||
| Variable | ||||||||
| Operating and other expenses: | ||||||||
| Sales and marketing | ||||||||
| Research and development | ||||||||
| General and administrative | ||||||||
| Interest & other expense, net | ||||||||
| Provision for income taxes | ||||||||
| Segment net income | ||||||||
| Reconciliation of profit or loss: | ||||||||
| Loss on discontinued operations | ( | ) | ( | ) | ||||
| Consolidated net income | $ | $ | ||||||
Adjusted EBITDA, a non-GAAP financial measure, is a metric used by the CODM to measure cash flow of the ongoing business. Adjusted EBITDA is defined as income or loss from continuing operations, plus depreciation and amortization, non-cash stock-based compensation, severance expense, interest and taxes, and other non-cash expenses including change in fair value of notes payable. The table below includes a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure.
Reconciliation of Adjusted EBITDA (Unaudited)
($ in thousands)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Income from continuing operations (GAAP Basis) | $ | $ | ||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Severance expense | ||||||||
| Taxes expense | ||||||||
| Interest accretion expense | ||||||||
| Note payable interest | ||||||||
| Interest income | ( | ) | ( | ) | ||||
| Change in fair value of note payable | ( | ) | ||||||
| Adjusted EBITDA | $ | $ | ||||||
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13. NOTES PAYABLE
BroadOak Loan
On October 29, 2021, the Company and its
subsidiaries entered into the Term Loan with BroadOak, providing for a term loan in the aggregate principal amount of $
The Term Loan contains affirmative and negative restrictive covenants that are applicable from and after the date of the Term Loan advance. These restrictive covenants, which include restrictions on certain mergers, acquisitions, investments, encumbrances, etc., could adversely affect our ability to conduct our business. The Term Loan also contains customary events of default.
The Company concluded that the Term Loan met the definition of a “recognized financial liability” which is an acceptable financial instrument eligible for the fair value option under ASC 825-10-15-4, and did not meet the definition of any of the financial instruments listed within ASC 825-10-15-5 that are not eligible for the fair value option. The Note is not convertible and does not have any component recorded to stockholders’ deficit. Accordingly, the Company elected the fair value option for the Note.
In May 2022, the Company issued a convertible
note to BroadOak, pursuant to which BroadOak funded a term loan in the aggregate principal amount of $
On October 24, 2023, the Company entered into a Second Amendment to Loan and Security Agreement (the “Second Amendment”) with BroadOak. The primary changes to the original Term Loan were as follows:
| ● | The Company made a one-time payment in an aggregate amount equal to $ | |
| ● | Effective November 1, 2023, the interest rate under the Term Loan was reduced from | |
| ● | The Company had the option to request an extension of the Loan Maturity Date in writing no less than sixty days prior to the Loan Maturity Date. If BroadOak agreed to the extension, the Loan Maturity Date would automatically be extended. |
The Second Amendment was treated as a debt modification which is accounted for prospectively. Since the Term Loan is carried at fair value under the fair value option, the Second Amendment did not result in any extinguishment gain or loss upon amendment, and the impact of the revised terms was incorporated into the Company’s fourth quarter 2023 fair value calculation.
On March 29, 2024, the Company entered into a Third Amendment to Loan and Security Agreement with BroadOak (the “Third Amendment”). The primary changes to the Second Amendment were as follows:
| ● | ||
| ● | Beginning April 1, 2024, the Company made $ |
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The Third Amendment was treated as a debt modification which is accounted for prospectively. Since the Term Loan is carried at fair value under the fair value option, the Third Amendment did not result in any extinguishment gain or loss upon amendment, and the impact of the revised terms was incorporated into the Company’s first quarter 2024 fair value calculation.
On January 14, 2025, the Company entered into a Fourth Amendment to the Loan and Security Agreement with BroadOak, extending the loan maturity date to December 31, 2025. The primary changes to the Third Amendment were as follows:
| ● | ||
| ● | Beginning July 1, 2025, and continuing through December 1, 2025, the Company will make monthly interest-only payments with the remaining loan balance due on the new maturity date. |
The Fourth Amendment was treated as a debt modification which is accounted for prospectively. Since the Term Loan is carried at fair value under the fair value option, the Fourth Amendment did not result in any extinguishment gain or loss upon amendment, and the impact of the revised terms was incorporated into the Company’s first quarter 2025 fair value calculation.
The balance of the loan outstanding at March
31, 2025 was $
14. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental Disclosures of Non-Cash Activities
(in thousands)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Taxes accrued for repurchase of restricted shares | $ | $ | ||||||
| Accrued capital expenditures | ||||||||
| Accrued Series C issuance costs | ||||||||
15. PREFERRED STOCK
Redeemable Preferred Stock
On January 10, 2020, the Company entered
into a Securities Purchase and Exchange Agreement (the “Securities Purchase and Exchange Agreement”) with 1315 Capital and
Ampersand (collectively, the “Investors”) pursuant to which the Company agreed to sell to the Investors an aggregate of $
In addition, the Company agreed to exchange
$
18
On October 10, 2024, the Company and the
Investors entered into an Exchange Agreement (the “Exchange Agreement”) pursuant to which the Investors exchanged (the “Exchange”)
an aggregate of shares of the Company’s Series B Preferred Stock, comprised of shares of Series B Preferred Stock
held by Ampersand and shares of Series B Preferred Stock held by 1315 Capital, which represented all of the Company’s issued
and outstanding Series B Preferred Stock, for newly created shares of Series C Preferred Stock, at an issuance price per share
of $. In the Exchange, Ampersand received shares of Series C Preferred Stock and 1315 received shares of Series C Preferred
Stock. The Company recorded approximately $
The Series C Preferred Stock is convertible
into the Company’s Common Stock at a conversion price of $
Voting
On any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Series C Preferred Stock will be entitled to cast the number of votes equal to the number of whole shares of Common Stock, into which the shares of Series C Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the Certificate of Designation, holders of Series C Preferred Stock will vote together with the holders of Common Stock as a single class and on an as-converted to Common Stock basis.
Director Designation Rights
The Series C Preferred Stock does not have director designation rights.
Conversion
The Certificate of Designation provides
that from and after the issuance date and subject to the terms of the Certificate of Designation, each share of Series C Preferred Stock
is convertible, at any time and from time to time, at the option of the holder into a number of shares of Common Stock equal to the product
of the Series C Conversion Ratio (the “Series C Conversion Ratio”) and the number of shares of Series C Preferred Stock to
be converted. The Series C Conversion Ratio is calculated by dividing the stated value of $
The aggregate number of shares of Common Stock that may be issued through conversion of all of the Exchange Shares is shares (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares).
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Mandatory Conversion
Immediately prior to the Company’s listing of Common Stock on The Nasdaq Stock Market, all outstanding shares of Series C Preferred Stock shall automatically convert into a number of shares of Common Stock equal to the product of the Series C Conversion Ratio and the number of shares of Series C Preferred Stock owned by each holder.
Liquidation
Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of shares of Series C Preferred Stock then outstanding will be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders on a pari passu basis with the holders of the Common Stock of the Company.
As of both March 31, 2025 and December 31, 2024, there were shares of Series C Preferred Stock issued and outstanding.
16. RECENT ACCOUNTING STANDARDS
Accounting Pronouncements Pending
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard on its financial statements but does not expect it to be material.
17. SUBSEQUENT EVENTS
On April 24, 2025, the Company announced that the Genetic Testing for Oncology (L39365) LCD issued by the Medicare Administrative Contractor Novitas Solutions will go into effect, ending reimbursement for the Company’s PancraGEN® test, and that specimens for first-line fluid chemistry and PancraGEN® testing will not be accepted by the Company after May 2, 2025. The Centers for Medicare & Medicaid Services (CMS) delayed implementation by 60 days earlier in the year and confirmed finalization of the LCD on April 24, 2025.
On
January 14, 2025, our board of directors approved a Restructuring Plan and cost-savings to reduce and better align its workforce
with the anticipated loss of PancraGEN® coverage by CMS which occurred on April 24, 2025. Under the Restructuring
Plan, the Company is reducing its workforce and impacted employees will be eligible to receive severance benefits. The Company
expects to incur severance costs in the range of $
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INTERPACE BIOSCIENCES, INC
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Statements that are not historical facts, including statements about our plans, objectives, beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “believes,” “expects,” “anticipates,” “plans,” “estimates,” “intends,” “projects,” “should,” “could,” “may,” “will” or similar words and expressions. These forward-looking statements are contained throughout this Form 10-Q.
Forward-looking statements are only predictions and are not guarantees of future performance. These statements are based on current expectations and assumptions involving judgments about, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. These predictions are also affected by known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from those expressed or implied by any forward-looking statement. Many of these factors are beyond our ability to control or predict. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors. Such factors include, but are not limited to, the following:
| ● | our expectations of future revenues, expenditures, capital or other funding requirements; | |
| ● | our reliance on Medicare reimbursement for our clinical services and our being able to successfully restructure ourselves and maintain profitability as a result of the decision of the Center for Medicare and Medicaid Services to cease reimbursement coverage of our PancraGEN® test on April 24, 2025 which resulted in specimens for first-line fluid chemistry and PancraGEN® testing not being accepted by the Company after May 2, 2025; | |
| ● | our secured lender has the right to foreclose on substantially all of our assets if we are unable to timely repay our outstanding obligations; | |
| ● | our dependence on sales and reimbursements from our clinical services for all of our revenue; | |
| ● | our ability to continue to generate sufficient revenue from our clinical service products and other products and/or solutions that we develop in the future is important for our ability to meet our financial and other targets; | |
| ● | our ability to finance our business on acceptable terms in the future, which may limit the ability to grow our business, develop and commercialize products and services, develop and commercialize new molecular clinical service solutions and technologies; | |
| ● | our dependence on third parties for the supply of some of the materials used in our clinical services tests; | |
| ● | the potential adverse impact of current and future laws, licensing requirements and governmental regulations upon our business operations, including but not limited to the evolving U.S. regulatory environment related to laboratory developed tests (“LDTs”), pricing of our tests and services and patient access limitations; | |
| ● | our reliance on our sales and marketing activities for future business growth and our ability to continue to expand our sales and marketing activities; | |
| ● | our being subject to the controlling interests of our two private equity investors who control, on an as-converted basis, as of May 2, 2025, an aggregate of 84.1% of our outstanding shares of Common Stock through their holdings of our Series C Preferred Stock, and this concentration of ownership may have a substantial influence on our decisions; |
21
| ● | the delisting of our Common Stock from Nasdaq has adversely affected and may continue to adversely affect our Common Stock and business and financial condition; | |
| ● | our ability to remediate the material weakness identified in our internal control over financial reporting as of March 31, 2025; | |
| ● | our determination to restate prior period consolidated financial statements and its impact on investor confidence and reputational issues; | |
| ● | any impacts from current global, economic, sovereign and political conditions and uncertainties, including the effects of, and uncertainty regarding, new or proposed tariff or trade regulations; | |
| ● | our ability to implement our business strategy; and | |
| ● | the potential impact of existing and future contingent liabilities on our financial condition. |
Please see Part I – Item 1A – “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on March 31, 2025, and as amended on April 28, 2025, as well as other documents we file with the SEC from time-to-time, for other important factors that could cause our actual results to differ materially from our current expectations as expressed in the forward-looking statements discussed in this Form 10-Q. Because of these and other risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. In addition, these statements speak only as of the date of the report in which they are set forth and, except as may be required by law, we undertake no obligation to revise or update publicly any forward-looking statements for any reason.
OVERVIEW
We are a fully integrated commercial company that provides molecular diagnostics, bioinformatics and pathology services for evaluation of risk of cancer by leveraging the latest technology in personalized medicine for improved patient diagnosis and management. We develop and commercialize genomic tests and related first line assays principally focused on early detection of patients with indeterminate biopsies and at high risk of cancer using the latest technology.
Impact of Our Reliance on CMS and Novitas
Along with many laboratories, we will be negatively impacted by LCD DL39365, which was finalized on April 24, 2025 by our local Medicare Administrative Contractor, Novitas. This LCD, which governs “Genetic Testing for Oncology,” resulted in the loss of existing Medicare coverage for one of our molecular tests, PancraGEN®. On June 5, 2023 we announced that Novitas issued the final LCD of Genetic Testing for Oncology (L39365) which, if finalized, would have established non-coverage for the Company’s widely used PancraGEN® test effective July 17, 2023. On July 6, 2023, Novitas announced that it would not be implementing the final Genetic Testing for Oncology LCD (L39365) as scheduled on July 17, 2023. Novitas then issued a new virtually identical proposed LCD affecting the same companies and tests and reaching the same conclusions as noted in the previously rescinded LCD on July 27, 2023. In response, the Company participated in a public meeting presentation and submitted detailed written comments supporting the use of PancraGEN®. On July 29, 2024, we announced that CMS granted Novitas an undefined extension to the final decision for the LCD. As a result, we were able to continue offering PancraGEN® and the related Point2® fluid chemistry tests for amylase, CEA, and glucose for all of 2024.
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On January 9, 2025, the Company announced the new LCD established non-coverage for its PancraGEN® test, and that it would stop offering the test and would not accept specimens for first-line fluid chemistry and PancraGEN® testing after February 7, 2025. As a result of the established non-coverage for PancraGEN®, the Company announced that its board of directors had approved a restructuring and cost-savings plan to reduce operating costs and better align its workforce with the loss of PancraGEN®. For more information, please see Restructuring below.
On January 27, 2025, the Company announced that CMS had directed its Medicare Administrative Contractors, Novitas and First Coast Service Options, Inc., to delay implementation of the Genetic Testing for Oncology LCD (L39365), from February 23, 2025 until April 24, 2025. On April 24, 2025, the Company announced that the LCD would take effect immediately. Because PancraGEN® is primarily ordered for Medicare patients, the decision to end reimbursement coverage means that the Company will not be able to continue offering this test. Specimens for first-line fluid chemistry and PancraGEN® testing were not accepted by the Company after May 2, 2025. As a result of the loss of PancraGEN®, the Company will begin implementing the Restructuring Plan and expects to incur restructuring and related costs in the range of $0.5 million to $0.6 million to be recorded primarily in the second quarter of 2025 which is in addition to the $0.2 million previously recorded in the first quarter of 2025.
Restructuring
As discussed above in “Impact of Our Reliance on CMS and Novitas,” on January 14, 2025, our board of directors approved a Restructuring Plan and cost-savings to reduce and better align its workforce with the anticipated loss of PancraGEN® coverage by CMS.
Under the Restructuring Plan, the Company would reduce its workforce and impacted employees would be eligible to receive severance benefits. The Company expects to incur severance costs in the range of $0.5 million to $0.6 million to be recorded primarily in the second quarter of 2025 which is in addition to the $0.2 million recorded in the first quarter of 2025.
Clinical Services
Our clinical services business commercializes clinically useful molecular diagnostic tests and molecular pathology services. We commercialize genomic tests and related first-line assays principally focused on risk-stratification of cancer using the latest technology to help personalize medicine and improve patient diagnosis and management. Our tests and services provide mutational analysis of genomic material contained in suspicious cysts, nodules, and lesions with the goal of better informing surgery or surveillance treatment decisions in patients suspected of thyroid, pancreatic, and other cancers. The molecular diagnostic tests we offer enable healthcare providers to stratify cancer risk, helping to avoid unnecessary surgical treatment in patients at low risk, while also helping to identify patients that would benefit from increased surveillance or surgical intervention.
We currently have three commercialized molecular diagnostic tests in the marketplace: ThyGeNEXT®, an expanded oncogenic mutation panel that helps “rule-in” and “rule-out” malignancy in thyroid nodules; ThyraMIR®v2, used in combination with ThyGeNEXT®, which further stratifies thyroid nodules for malignancy risk utilizing a proprietary microRNA gene expression classifier; and RespriDx® a genomic test that also utilizes our PathFinderTG® platform, to help physicians differentiate metastatic or recurrent lung cancer from the presence of newly formed primary lung cancer.
Revenue Recognition
Clinical services derive revenues from the performance of proprietary assays or tests. Our performance obligation is fulfilled upon completion, review and release of test results to the customer, at which time we bill third-party payers or direct-bill payers for the tests performed. Under Accounting Standards Codification 606, revenue is recognized based upon the estimated transaction price or NRV, which is determined based on historical collection rates by each payer category for each proprietary test offered. To the extent that the transaction price includes variable consideration, for all third party and direct-bill payers and proprietary tests, we estimate the amount of variable consideration that should be included in the transaction price using the expected value method based on historical experience.
The ultimate amounts received from the third-party and direct-bill payers and related estimated reimbursement rates are regularly reviewed and we adjust the NRVs and related contractual allowances accordingly. If actual collections and related NRVs vary significantly from our estimates, we adjust the estimates of contractual allowances, which affects net revenue in the period such variances become known.
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Cost of Revenue
Cost of revenue consists primarily of the costs associated with operating our laboratory and other costs directly related to our tests. Personnel costs, which constitute the largest portion of cost of services, include all labor-related costs, such as salaries, bonuses, fringe benefits and payroll taxes for laboratory personnel. Other direct costs include, but are not limited to, laboratory supplies, certain consulting expenses, royalty expenses, and facility expenses.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain statements of operations data. The trends illustrated in this table may not be indicative of future results.
Consolidated Results of Continuing Operations for the Quarter Ended March 31, 2025 Compared to the Quarter Ended March 31, 2024 (in thousands)
| Three Months Ended March 31, | ||||||||||||||||
| 2025 | 2025 | 2024 | 2024 | |||||||||||||
| % to | % to | |||||||||||||||
| revenue | revenue | |||||||||||||||
| Revenue, net | $ | 11,515 | 100.0 | % | $ | 10,178 | 100.0 | % | ||||||||
| Cost of revenue | 4,145 | 36.0 | % | 3,867 | 38.0 | % | ||||||||||
| Gross profit | 7,370 | 64.0 | % | 6,311 | 62.0 | % | ||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing | 2,814 | 24.4 | % | 2,821 | 27.7 | % | ||||||||||
| Research and development | 177 | 1.5 | % | 137 | 1.3 | % | ||||||||||
| General and administrative | 2,550 | 22.1 | % | 2,239 | 22.0 | % | ||||||||||
| Total operating expenses | 5,541 | 48.1 | % | 5,197 | 51.1 | % | ||||||||||
| Operating income | 1,829 | 15.9 | % | 1,114 | 10.9 | % | ||||||||||
| Interest accretion expense | - | 0.0 | % | (19 | ) | -0.2 | % | |||||||||
| Note payable interest | (78 | ) | -0.7 | % | (197 | ) | -1.9 | % | ||||||||
| Other income (expense), net | 21 | 0.2 | % | (82 | ) | -0.8 | % | |||||||||
| Income from continuing operations before tax | 1,772 | 15.4 | % | 816 | 8.0 | % | ||||||||||
| Provision for income taxes | 18 | 0.2 | % | 4 | 0.0 | % | ||||||||||
| Income from continuing operations | 1,754 | 15.2 | % | 812 | 8.0 | % | ||||||||||
| Loss from discontinued operations, net of tax | (107 | ) | -0.9 | % | (104 | ) | -1.0 | % | ||||||||
| Net income | $ | 1,647 | 14.3 | % | $ | 708 | 7.0 | % | ||||||||
Revenue, net
Revenue, net for the three months ended March 31, 2025 increased by $1.3 million, or 13%, to $11.5 million, compared to $10.2 million for the three months ended March 31, 2024. The increase was driven by increased test volumes as compared to the prior year.
Cost of revenue
Cost of revenue for the three months ended March 31, 2025 was $4.1 million, as compared to $3.9 million for the three months ended March 31, 2024. The increase was primarily due to an increase in lab supplies related to test volume increases. As a percentage of revenue, cost of revenue was approximately 36% for the three months ended March 31, 2025 and 38% for the three months ended March 31, 2024.
Gross profit
Gross profit was approximately $7.4 million for the three months ended March 31, 2025 and $6.3 million for the three months ended March 31, 2024. The gross profit percentage was approximately 64% for the three months ended March 31, 2025 and 62% for the three months ended March 31, 2024.
Sales and marketing expense
Sales and marketing expense was approximately $2.8 million for both the three months ended March 31, 2025 and March 31, 2024, respectively.
Research and development
Research and development expense was approximately $0.2 million for the three months ended March 31, 2025 and $0.1 million for the three months ended March 31, 2024.
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General and administrative
General and administrative expense was approximately $2.6 million for the three months ended March 31, 2025 and $2.2 million for the three months ended March 31, 2024. The increase can be primarily attributed to an increase in employee costs in the first quarter of 2025.
Operating income
Operating income from continuing operations was $1.8 million for the three months ended March 31, 2025 and $1.1 million for the three months ended March 31, 2024. The increase in operating income for the three months ended March 31, 2025 can be primarily attributed to the increase in revenue and gross profit discussed above.
Note payable interest expense
Note payable interest expense was $0.1 million for the three months ended March 31, 2025 and $0.2 million for the three months ended March 31, 2024. The interest expense was from the Term Loan.
Provision for income taxes
Income tax expense was approximately $18,000 for the three months ended March 31, 2025 and $4,000 for the three months ended March 31, 2024.
Loss from discontinued operations, net of tax
We had a loss from discontinued operations of approximately $0.1 million for both the three months ended March 31, 2025 and March 31, 2024.
Non-GAAP Financial Measures
In addition to the GAAP results provided throughout this document, we have provided certain non-GAAP financial measures to help evaluate the results of our performance. We believe that these non-GAAP financial measures, when presented in conjunction with comparable GAAP financial measures, are useful to both management and investors in analyzing our ongoing business and operating performance. We believe that providing the non-GAAP information to investors, in addition to the GAAP presentation, allows investors to view our financial results in the way that management views financial results.
In this Quarterly Report on Form 10-Q, we discuss Adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA is a metric used by management to measure cash flow of the ongoing business. Adjusted EBITDA is defined as income or loss from continuing operations, plus depreciation and amortization, non-cash stock-based compensation, severance expense, interest and taxes, and other non-cash expenses including change in fair value of notes payable. The table below includes a reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure.
Reconciliation of Adjusted EBITDA (Unaudited)
($ in thousands)
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2025 | 2024 | |||||||
| Income from continuing operations (GAAP Basis) | $ | 1,754 | $ | 812 | ||||
| Depreciation and amortization | 95 | 52 | ||||||
| Stock-based compensation | 15 | 79 | ||||||
| Severance expense | 168 | - | ||||||
| Taxes expense | 18 | 4 | ||||||
| Interest accretion expense | - | 19 | ||||||
| Note payable interest | 78 | 197 | ||||||
| Interest income | (7 | ) | (16 | ) | ||||
| Change in fair value of note payable | (25 | ) | 98 | |||||
| Adjusted EBITDA | $ | 2,096 | $ | 1,245 | ||||
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LIQUIDITY AND CAPITAL RESOURCES
In October 2021, the Company entered into the Term Loan with BroadOak, providing for a term loan in the aggregate principal amount of $8,000,000. Funding of the Term Loan took place on November 1, 2021. The Term Loan was scheduled to mature upon the earlier of (i) October 31, 2024 or (ii) the occurrence of a change in control, and bears interest at the rate of 9% per annum. The Term Loan is secured by a security interest in substantially all the Company’s and its subsidiaries’ assets and was subordinate to the Company’s former $7,500,000 revolving credit facility with Comerica Bank. The Term Loan has an origination fee of 3% of the Term Loan amount, and a terminal payment equal to (i) 15% of the original principal amount of the Term Loan if the change of control occurs on or prior to the first anniversary of the funding of the Term Loan, (ii) 20% of the original principal amount of the Term Loan if the change of control occurs after the first anniversary but on or prior to the second anniversary of the funding of the Term Loan and (iii) 30% of the original principal amount of the Term Loan if the change of control occurs after the second anniversary of the funding of the Term Loan, or if the Term Loan is repaid on its maturity date. Upon receipt of the term loan, the proceeds were used to repay in full at their maturity the notes extended by Ampersand and 1315 Capital discussed above. See Note 13, Notes Payable, for more details. In May 2022, the Company issued a Convertible Note to BroadOak, pursuant to which BroadOak funded a term loan in the aggregate principal amount of $2.0 million which was converted into a subordinated term loan and was added to the outstanding balance of the Term Loan. See Note 13, Notes Payable, for more details.
On October 24, 2023, the Company entered into a Second Amendment to the Loan and Security Agreement with BroadOak (the “Second Amendment”). The primary changes to the Term Loan were as follows:
| ● | The Company made a one-time payment in an aggregate amount equal to $2,500,000, on October 30, 2023 and applied the payment in full satisfaction of the $3,000,000 Terminal Payment (as defined in the Term Loan). See Note 13, Notes Payable, regarding the Terminal Payment. | |
| ● | Effective November 1, 2023, the interest rate under the Term Loan was reduced from 9% to 8% through the maturity date of October 31, 2024 or earlier, upon the occurrence of a change in control (“Loan Maturity Date”). | |
| ● | The Company has the option to request an extension of the Loan Maturity Date in writing no less than sixty days prior to the Loan Maturity Date. If BroadOak agreed to the extension, the Loan Maturity Date would automatically be extended. |
On March 29, 2024, the Company entered into a Third Amendment to the Loan and Security Agreement with BroadOak (the “Third Amendment”), extending the loan maturity date to June 30, 2025. The primary changes to the Second Amendment were as follows:
| ● | The maturity date was extended to June 30, 2025. | |
| ● | Beginning April 1, 2024, the Company will make $500,000 monthly payments with the remaining loan balance due on the new maturity date. |
On January 14, 2025, the Company entered into a Fourth Amendment to the Loan and Security Agreement with BroadOak (the “Fourth Amendment”), extending the loan maturity date to December 31, 2025. The primary changes to the Third Amendment were as follows:
| ● | The maturity date was extended to December 31, 2025. | |
| ● | Beginning July 1, 2025, and continuing through December 1, 2025, the Company will make monthly interest-only payments with the remaining loan balance due on the new maturity date. |
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The Term Loan contains affirmative and negative restrictive covenants, including restrictions on certain mergers, acquisitions, investments and encumbrances which could adversely affect our ability to conduct our business. The Term Loan also contains customary events of default. The balance of the loan at March 31, 2025 was $2.9 million.
For the three months ended March 31, 2025, we had operating income from continuing operations of $1.8 million. As of the three months ended March 31, 2025, we had cash and cash equivalents of $1.2 million, total current assets of $11.7 million and current liabilities of $8.7 million. As of May 2, 2025, we had approximately $1.6 million of cash and cash equivalents.
During the three months ended March 31, 2025, net cash provided by operating activities was $1.2 million. The main component of cash provided by operating activities was our net income of $1.6 million. During the three months ended March 31, 2024, net cash used in operating activities was $0.1 million. The main component of cash used in operating activities was our decrease in accrued salaries and bonus of $1.1 million.
For the three months ended March 31, 2025, cash used in investing activities was zero. For the three months ended March 31, 2024, cash used in investing activities was primarily related to the purchase of lab equipment.
For the three months ended March 31, 2025, cash used in financing activities was $1.5 million, which were payments made on the Term Loan. For the three months ended March 31, 2024, cash used in financing activities was $0.6 million, which were payments made on the Term Loan.
We generated positive cash flows from operations for the three months ending March 31, 2025. We intend to meet our ongoing capital needs by using our available cash as well as through targeted margin improvement; collection of accounts receivable; containment of costs; and the potential use of other financing options and other strategic alternatives.
The Company continues to explore various strategic alternatives, dilutive and non-dilutive sources of funding, including equity and debt financings, strategic alliances, business development and other sources in order to provide additional liquidity. With the delisting of the Common Stock from Nasdaq in February 2021, our ability to raise additional capital on terms acceptable to the Company has been adversely impacted. There can be no assurance that the Company will be successful in obtaining such funding on terms acceptable to the Company. The Company may seek an uplisting of its Common Stock to Nasdaq, but no assurances can be given that a Nasdaq listing will be achieved.
Further, along with many laboratories, we will be negatively impacted by the LCD L39365, which was finalized on April 24, 2025 by our local Medicare Administrative Contractor, Novitas. This LCD, which governs “Genetic Testing for Oncology,” resulted in the loss of existing Medicare coverage for one of our molecular tests, PancraGEN®. On June 5, 2023 we announced that Novitas issued the final LCD of Genetic Testing for Oncology (L39365) which, if finalized, would have established non-coverage for the Company’s widely used PancraGEN® test effective July 17, 2023. On July 6, 2023, Novitas announced that it would not be implementing the final Genetic Testing for Oncology LCD (L39365) as scheduled on July 17, 2023. Novitas then issued a new virtually identical proposed LCD affecting the same companies and tests and reaching the same conclusions as noted in the previously rescinded LCD on July 27, 2023. In response, the Company participated in a public meeting presentation and submitted detailed written comments supporting the use of PancraGEN®. On July 29, 2024, the Company announced that CMS granted Novitas an undefined extension to the final decision for the LCD. As a result, we were able to continue offering PancraGEN® and the related Point2® fluid chemistry tests for amylase, CEA, and glucose for all of 2024.
On January 9, 2025, we announced that the new LCD established non-coverage for the Company’s PancraGEN® test, and that we would stop offering the test and would not accept specimens for first-line fluid chemistry and PancraGEN® testing after February 7, 2025. As a result of the established non-coverage for PancraGEN®, we announced, in January 2025, that our board of directors had approved the Restructuring Plan to reduce operating costs and better align our workforce with the loss of PancraGEN®. See “Restructuring.”
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On January 27, 2025, the Company announced that CMS had directed its Medicare Administrative Contractors, Novitas and First Coast Service Options, Inc., to delay implementation of the Genetic Testing for Oncology LCD (L39365), from February 23, 2025 until April 24, 2025. On April 24, 2025, the Company announced that the LCD would take effect immediately and that specimens for first-line fluid chemistry and PancraGEN® testing will not be accepted by the Company after May 2, 2025. On April 25, 2025, the Company announced implementation of its previously approved Restructuring Plan. The Company expects the implementation of the Restructuring Plan to be substantially completed by the end of the second quarter of 2025. The Company expects to incur restructuring and related costs in the range of $0.5 million to $0.6 million to be recorded primarily in the second quarter of 2025 which is in addition to the $0.2 million recorded in the first quarter of 2025.
With the Company’s continued improvement in operating performance, as of the date of this filing, even with the loss of reimbursement coverage of PancraGEN®, the Company anticipates that current cash and cash equivalents and forecasted cash receipts will be sufficient to meet its anticipated cash requirements through the next twelve months from the date of the filing of this report.
Inflation
We do not believe that inflation had a significant impact on our results of operations for the periods presented. However, inflation and supply chain disruptions, whether caused by tariffs, restrictions or slowdowns in shipping or logistics, increases in demand for certain goods used in our operations, or otherwise, could impact our operations in the near term.
Critical Accounting Estimates
See Note 5, Summary of Significant Accounting Policies and Note 16, Recent Accounting Standards to the Interim Financial Statements included elsewhere in this Quarterly Report on Form 10-Q for information regarding newly adopted and recent accounting pronouncements. See also Note 1, Nature of Business and Significant Accounting Policies to our financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, as amended, for a discussion of our critical accounting policies. There have been no material changes to such critical accounting policies. We believe our most critical accounting policies include accounting for revenue recognition, leases, income taxes and stock-based compensation expense.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our principal executive officer and principal financial officer evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2025. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Based on management’s evaluation of the Company’s disclosure controls and procedures, the principal executive officer and principal financial officer of the Company have identified a material weakness in the Company’s internal control over financial reporting in the quarterly period ended December 31, 2024 related to the accruing of royalty expense and the understanding of the complex agreements associated with the royalties, and have concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2025 as a result of such material weakness in the Company’s internal control over financial reporting.
The Company has adopted a remediation plan, pursuant to which the Company is amending its internal controls to mitigate the material weakness which was identified by management, including holding quarterly meetings between the accounting department and lab management to discuss any agreements that may have been entered into during that quarter. The Company believes implementation of these processes and appropriate testing of their effectiveness will remediate the material weakness in the Company’s internal control over financial reporting.
Changes in Internal Control over Financial Reporting
Other than the material weakness and the adoption of the remediation plan discussed above, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K of the Company filed with the SEC on March 31, 2025, as amended, and as updated and supplemented below and in subsequent filings. These risk factors could materially harm our business, operating results and financial condition. Additional factors and uncertainties not currently known to us or that we currently consider immaterial also may materially adversely affect our business, financial condition or future results.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
Item 6. Exhibits
| * | Filed Herewith. | |
| + | Exhibits 32.1 and 32.2 are being furnished herewith and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference to any registration statement or other document filed under the Securities Act or the Exchange Act, except as otherwise stated in any such filing. |
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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.
| Date: May 8, 2025 | Interpace Biosciences, Inc. |
| (Registrant) | |
| /s/ Thomas W. Burnell | |
| Thomas W. Burnell | |
| President and Chief Executive Officer | |
| (Principal Executive Officer) | |
| Date: May 8, 2025 | /s/ Christopher McCarthy |
|
Christopher McCarthy Chief Financial Officer | |
| (Principal Financial Officer) |
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